Could I show a negative income each year with a LLC?

Discussion in 'Business Operations' started by justmjc, Mar 4, 2004.

  1. justmjc

    justmjc LawnSite Senior Member
    Posts: 261

    If I formed an LLC and paid myself as an employee, is it possible to show a loss each year on the business. If the business makes $60 and I have $5k in expenses along with $55k, my salary, then I would have no business income. Is this a benifit of an LLC? I know it shields you from personal property lawsuits, but what effect would this have on paying taxes. Would I actually make more money doing things this way because of showing the loss to the business or not? Does that method actually save $$$ or am I wrong thinking this way? Also, how much $ to set up an LLC? Cost $10 to register as a sole prop., is it the same setting up for an LLC?

    Anyone care to educate a little?
  2. hole in one lco

    hole in one lco LawnSite Bronze Member
    Posts: 1,793

    I purchase equipment and right that off so uncle sam can take it. thats the best way imo
  3. you can do that, but looks like to me the IRS will notice you a lot more, and you don.t want a audit.
  4. MacLawnCo

    MacLawnCo LawnSite Bronze Member
    Posts: 1,847

    to be considered technically a business, it is my understanding you need to show profit in 3 of 5 years... while there are exceptions, what you are trying to accomplish is of course cheating and uncle sam will smell you out like old fish.
  5. jackelope68

    jackelope68 LawnSite Member
    Posts: 36

    I just formed a LLc this year. My thinking is keep your salary low ( remember there are additional payroll taxes you will pay on your salary) Depending on how you set up, the income from the business may just be subject to federal and state imcome taxes. My accountant sugested that I keep my salery at a realestic level ( that the I.R.S would accept) and the remaining income can be considered passive income and not subject to F.I.C.A taxes. My accountant knows the details. A GOOD ACCOUNTANT CAN SAVE YOU A BUNCH OF MONEY

    I had to register with the state for $125 to form an LLc. also everything else must be changed into the LLc name to have the liability shield.
  6. mtdman

    mtdman LawnSite Gold Member
    Posts: 3,137

    In Michigan the charge is $50 to set up an LLC. But you really need to know what you are doing. You have to set up rules to running the business, know how to fill out the paperwork, etc. I had my lawyer fill all that out and set it up last year for me. Cost me $300, and it was well worth it.

    I'm not really sure what you are asking. In Michigan, state business tax doesn't start until $135000, I think. Unless you make more than that you won't be paying tax on the business. All the profits pass through to you and you have to show it as income.
  7. IndyPropertyCare

    IndyPropertyCare LawnSite Member
    Posts: 201

    LLC = Limited Liability Company ( limits the liability on you )

    As for your tax questions, consult a CPA.

    IMO...the only way to show a loss on a business is if the operating expenses are more than the profit. There are several deductions for business's when filing each year and also depends on the type of account system ( formula ) you are using...Straightline / cash / accrual..etc.

    If your questioning how...then seek the help of a professional CPA.

  8. Tim Canavan

    Tim Canavan LawnSite Member
    from Houston
    Posts: 218

    sounds like you're asking for trouble.
  9. promower

    promower LawnSite Bronze Member
    Posts: 1,232

    Mac is right, I was told that you can only show a loss for 3 out 5 years after that you cant show a loss for tax breaks.
  10. sodzilla

    sodzilla LawnSite Member
    Posts: 219

    I'm a single party LLC. My tax guy told me that the LLC is not taxed. I am taxed for being the owner. All the money the LLC makes shows as MY income and is taxed that way. He suggested to just draw from the LLC as needed for personal exspenses. Like write a company check to myself and deposit it into my personal account. Then write a personal check for the morgage, personal vehicle ect.

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