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Discussion in 'Business Operations' started by DFREAMGREEN, Jan 15, 2013.
How does pass through taxation work?
This post here is right on. Get a good bunch of GL coverage as a solo, and you are set to go. LLC does nothing for you albeit it isn't a bad thing to do, either. Stay out of debt which is common sense anyway.
Also, a lot of misinformation on here about taxation. OP, please consult some good literature to get the truth about biz taxation.
I will just say I disagree with you on a few things. LLC is not a license to be a careless goofball who destroys other's properties and runs up bad credit, that much we agree on. General liability is a given for anyone in business as an LLC doesn't protect you from being sued when uninsured. That said, there are times when an LLC can protect you and most of it has to do with getting upside down with the company finances. If you had a major accident that disabled you and owed a lot of money on equipment and had a large open materials ticket on a job you just started, the banks and materials companies made those loans to the company and not to you. So there is some protection in these events that could same you your home and your personal finances. I do agree, get a consultant on these things and talk to them about your best option.
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.
And I agree with you GL about LLC's advantage if debtors go after you.
Simple solution: don't take on biz debt. Solved.
Yes you need the tax id my friend
I know it is based on revenue and salary so it will be hard to compare situations but do you find that being taxed as a C Corp is helpful?
Only corp tax I pay is 25.00 to NY.After all my profit and loss is done,the bottom figure goes onto my personal taxes and I pay tax on that.
So in effect you pay yourself a fair wage which is taxed as regular income and the Profit paid as a bonus is capital gain which leaves nothing to be taxed at the corporate level.
Why on earth would you want to sign up voluntarily to the government or the tax man?????????????????
Just the same why would you voluntarily give them your income???????
TeamYardsale4 is getting warmer with his quote of
To the original poster, please become competent in your own affairs and READ and READ some more on how YOU would like to live your life.
When you see posts that state "Yes you need a tax id" please oh please dear lord think about the consequences of what could be the rest of your life by doing so.