How LLCs are Structured and Taxed

By Greg Lindberg, 1800Accountant.com Writer

Before you receive the hard-earned title of being a newly crowned business owner, you must weigh the different types of business entities available to you. Each entity is designed uniquely when it comes to how the IRS treats it. Considering the tax obligations that apply to each entity is a must to make a wise business decision. 1800Accountant.com, one of MyCorporation’s partners, offers a few pointers to consider on how LLCs are structured and taxed.
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S is for S-Corporation

For this week’s post we will get to know one the incorporation options a bit better and learn what it has to offer a new entrepreneur: the S-Corporation!

First off, what is an S-Corporation?

Well, an S-Corporation (also known as the S-Corp) is a special type of corporation that draws its designation from subsection S of the tax code. To start an S-Corp, a small business owner starts a C-Corporation in the state where it is headquartered, then files for S-corporation status with the IRS. While an-S Corporation is similar to a C-Corporation, it has different income and self-employment tax regulations.
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Business Basics: Professional Corporations

Welcome to our weekly business basics post! This week we decided to explore a specialized legal entity called a professional corporation (PC). Now most of those who know a little bit about corporate law probably know that there are two, main types of corporations – S-Corps, and C-Corps. But in addition to these, there are a few other specialized structures that are important to keep under the belt of a small business, like the professional corporation.

So what is a professional corporation?
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Guest Post: How to Do Your Taxes if You’re a Freelancer

This article was originally printed on LearnVest.com.

You’re free! Free to sleep in until 11 a.m., free to work while your adorable toddler plays at your feet, free to … keep really good records of all your expenses for your taxes.

We know. Not so fun. The reality is, being self-employed can be awesome for 11 months out of the year, and then come crashing down on your head in the form of lost receipts and unpaid estimated taxes in April. We want to save you from that sinking feeling. Read on for what every freelancer needs to know for your taxes.

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S-Corporation 101: What you need to know

With the tax season upon us, we’d like to help shed some light on tax issues. Every Friday for the next several weeks we will discuss how the following tax considerations apply to different business entities. (Look for the little piggies!)  The considerations are:

  1. 1. Pass through of gains
  2. 2. Pass through of losses
  3. 3. Transfer of assets to the entity, and
  4. 4. Transfer of assets from the entity

This week we’re going to cover the S-corporation.

What is an S-corp?

For starters, an S-corporation starts just like a normal C-corporation. The letters (S & C) are designations from subchapters of the IRS code. Most corporations are C corporations. An S corporation is a corporation that has made a special election to be taxed in a certain way. Because of this special treatment, there are additional rules and restrictions on top of the standard corporate law requirements. (more…)

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Tips for Newly Incorporated Business Owners

Congratulations! You incorporated your business! Now comes the dreaded question: now what? One of the most common obstacles encountered by new businesses is their own fear or self-doubt. With confidence and a good network of other entrepreneurs, starting and growing a business can happen quite easily. It takes persistence and focus, but it can be done. Having good resources – other entrepreneurs, experienced business owners – who can serve as a sounding board is extremely important. (more…)

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Financing for Start-Ups

So you’ve got a great idea for a business that you really think will be a huge success. You’ve done your research and made a business plan, but now what?

One of the biggest challenges facing a prospective business owner today is financing. Where do you find the money? How do you get it? For the business savvy owner, there are many different options for finding the money to start your own business.

1) Friends and Family
This is the most obvious place to look for financing options. Many loyal friends and relatives are more than happy to put some money into a start-up business when asked by someone they love and trust. Remember though to expand your friends and family circle. Don’t just look to your immediate family members and best friends. Make a list of everyone you know, including acquaintances that you see infrequently, and then follow up with those people too. You never know who shares your interests and might want to put some money into a business they believe in.

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S-Corp Election

There are many people who consider S-Corporation election when forming their new corporation.  An S-Corporation offers both advantages and disadvantages that regular C-Corporations do not, and may be beneficial depending on what type of business you run and how you would like to run that business.  S-Corporations operate similarly to regular corporations, but are taxed in a manner that is similar to a Limited Liability Company.

For example, the main difference between an S-Corporation and a regular C-Corporation is that the profits and losses of the S-Corporation are passed on to the various shareholders in the corporation.  The shareholders are then taxed on their individual share of the corporation’s profits or losses and report this on their individual tax returns. (more…)

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TAX BENEFITS AND BUSINESS ENTITIES

The standard “corporation” format used by businesses to protect personal assets and minimize personal liability can also include other types of business entities, including S-Corporations and Limited Liability Companies (“LLC”).  The corporation is America’s most popular and oldest form of business entity. However, with the tax advantages of Limited Liability Companies and S-Corporations, other types of business entities are quickly becoming more popular. 

 Limited Liability Companies 

An LLC combines the limited liability shield traditionally associated with corporations, the structural and financial flexibility of partnerships, and the tax benefits of “pass-through” taxation. As a pass-through entity, the LLC pays no income tax. Instead, items of taxable income, gain, loss, and deduction pass through the LLC to its owners, and are reported by them on their separate income tax returns. Similar to the corporation, an LLC is recognized as a separate legal entity from its “members.” Thus, an LLC can own property and commit itself to contractual obligations.

 IRS Treatment of the One-Member LLC 

An LLC with only one member/owner is automatically considered to be a sole proprietorship unless an election is made to be treated as a corporation via IRS Form 8832. Thus, the sole member of an LLC will file Form 1040  (U.S. Individual Income Tax Return), and will include Form 1040, SCHEDULE C (Profit or Loss from Business) with his/her tax returns.

 

Regardless of how many members the LLC has, the LLC may file an Election to be Treated as a Corporation for Purposes of Taxation (IRS Form 8832). If an election is made to be treated as a corporation, the LLC must file Form 1120 (U.S. Corporation Income Tax Return).

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