Tax advantages when you form a LLC – Bent Enterprise

Tax advantages when you form a LLC

The first step to make your business completely a legal structure is to form a LLC or an S-corp or a C-corp or any other form of corporation. Of all the different legal business entities, you stand to gain a much better benefits when you form a LLC. In this article, we share with you some of the major tax benefits that one can gain as they form a LLC.

Flexible taxation

When you form a LLC, you are given an option to choose how you want to be taxed. People are often confused with this whey they form a LLC. The option for the owner is to choose between a corporate and a disregarded structure when they are filing taxes and when they form a LLC. In case you choose to go with the former when you form a LLC, you can enjoy a lower tax rate for the first $75k on the income. If you choose to be a disregarded entity when you form a LLC, then the treatment will be similar to that of the sole proprietorship where the income is considered as personal income for taxation. All you need to make your choice when you form a LLC is to use form 8832 when filing with IRS on the tax treatment you want.
As you form a LLC, your choice on the type of tax treatment should be tread carefully as it will vary with different business conditions. When you form a LLC, decide on the amount of income you want to be treated personally and the amount to be reinvested and then decide on the tax treatment. Every business is different and hence the tax treatment should be decided accordingly in reference to how you form a LLC. Taking the assistance of a tax and legal expert when you form a LLC can help you make a better decision.

Steps for incorporate how to

  • The first important step to incorporate how to, is to decide on the type of corporation you want to form. As you know there are varying business entities like LLC, S-corp and C-corp that you can choose from. Choosing which one you want to incorporate how to is your first step.
  • Choose an attorney who can help you with the filing of the incorporation and other processes in this next step of incorporate how to. Yes, this means additional attorney expenses but it will save you from missing out on any potential law and in ensuring that you are completely protected. Incorporate how to is therefore a better way if you have an attorney by your side to guide you.
  • Despite the type of entity you want to form, incorporate how to involve you to prepare “Articles of incorporation” along with the corporate bylaws that governs what each member in the organization is entitled to do and supposed to do.
  • Preparing a detailed document on the roles and responsibilities, schedule and venue for annual meetings, etc. is what bylaws are about and forming them is a definite must in incorporate how to guide.
  • The next logical step on incorporate how to is to choose the state in which you want to incorporate. Every state has its own regulations, while some are flexible, some are not. Knowing which state’s statutes will fit your business demands can go a long way in forming a peaceful and flourishing organization. Choosing the right state is therefore the next step in incorporate how to guide. A tax advisor can help you make the right decision and inform you on the varying laws in every state.
  • If you have chosen a different state for incorporation but have operations in a different state, then you should know there will be taxes to be paid in the state where you run the operations. Having an experienced attorney who knows the ins and outs of incorporate how to can help wade through these tough waters calmly.

More limits on contribution

When you form a LLC, you are also gaining the option to increase the limit of contribution on life insurance and retirement policies. So as you form a LLC, you also make a better decision for your future as well. Form a LLC and plan your future too!

Option to lease assets

When you form a LLC, you have the option to lease out your personal assets to the company. To give you an example, you can use your home, your personal asset, as your office when you form a LLC and have a lease agreement in place. Of course, you need to keep these transactions well within legitimacy.
Last but not the least you can even deduct the expense you incur when you form a LLC and having all your receipts in place can definitely help you.
If you are still wondering whether to form a LLC or not or if you are wondering which form of corporation will best suit you, we hope that having taken a look at the tax benefits when you form a LLC, you have a better understanding of the scenarios.