Are You Maximizing Your LLC Tax Benefits?
Each type of business entity calculates and reports taxes somewhat differently. If your company is structured as a limited liability company, or LLC, you have the option to choose how your business will be taxed. Because taxes may be charged to the business or the owners, consulting with a tax professional can help you determine which classification provides the most benefits.
If the LLC is owned by one person or member, it can be taxed as a sole proprietorship, with all income and expenses flowing to the owner’s personal tax return. Choosing this option can be simpler in many cases.
LLC’s owned by multiple parties can file as a partnership. Profits are taxed on the members’ tax returns. Members may start out using this classification but later change to one of the corporate filing structures.
To file as a C corporation, owners file an Entity Classification Form so that the LLC pays its corporate income taxes. Alternatively, members could file as an S corporation after filing an Election by a Small Business Corporation form so that the profits are taxed on the members’ personal income tax returns.
Members and their tax professionals consider several factors when choosing a tax filing strategy, including how profits are distributed to members, the percentage of profits retained by the company, how the state taxes the business and the types of fringe benefits that are paid to members and employees.
Rely on Ladlas Prince accounting services to make sure your LLC is choosing the best tax filing strategy for your circumstances. Contact us for a thorough accounting review in preparation for the upcoming tax season.