Originally Posted by Blades Lawn Maintenance
How does pass through taxation work?
It's a long answer that has a lot of positive variables, but the brief answer is this.
In a single owner LLC with pass through taxation, the LLC never actually pays taxes unless you set it differently in the future. The single owner virtually becomes the llc and pays the taxes on his individual return (some extra paperwork,sched C, but nothing scary).
Without saying much more, as a business you have a lot more deductible items than you do as an individual. The business itself generally eats up a lot of money everyday in overhead and that overhead now sits in your write off bucket. Profits and losses are passed through to the single owner. In many cases after the single owner has paid himself, the LLC borrows money from the owner to pay it's own bills (pretty common practice). At this point the LLC is filing a loss and without being to complicated, this actually can really lessen your tax burden at the end of the year.