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Which is better

Discussion in 'Business Fundamentals' started by DJ Contracting, Feb 20, 2006.

  1. DJ Contracting

    DJ Contracting PlowSite.com Addict
    Messages: 1,392

    OK i'm looking to change from a C and S corp to either a LLC or back to running under a DBA or just a C corp, now i went to an C and S for Liabilty reasons however i feel after three years that i'm paying three different tax brackets ( Personal, C and S) how does the LLC tax work, do you actually get money back if you show a loss, or does it roll over to the next year, and how does the liabilty work?
     
  2. DJ Contracting

    DJ Contracting PlowSite.com Addict
    Messages: 1,392

    Come on guys Bump
     
  3. repo_man62

    repo_man62 Senior Member
    Messages: 502

    Mine is an llc joe,, from my understanding...liability is on the company...not you personally. As far as taxes...not sure on that one yet.Haven''t had the snow to make any money like you's up der in Mich.
     
  4. DJ Contracting

    DJ Contracting PlowSite.com Addict
    Messages: 1,392

    Thanks Bob anybody else.
     
  5. SLSNursery

    SLSNursery PlowSite.com Veteran
    Messages: 140

    There are different scenarios

    In an LLC (this may vary state to state), you can either be set up like a partnership, and the owners would be called members. Depending on your state, you may be allowed to have a 1 person LLC.

    Your question was on the taxes, and to the best of my knowledge, I would describe it as pass through taxation. I operate a few LLCs in Connecticut. In the LLC, you issue guaranteed payments to members. In active businesses (as opposed to passive LLCs where you simply have an investment interest like real estate) you take the guaranteed payment as wages, and this shows as an expense against the business revenues. No W-2 is issued and taxes are not withheld. You might call it a draw, or payroll, but the tax return calls it guaranteed payment. Self employment taxes are figured on the guaranteed payment wages, but not on guaranteed payment derived from the passive income LLCs. The LLC completes an annual tax return, probably similarly to a corporation (IRS 1065), and you would be issued a K-1 for your personal stake. The net profit or loss from the LLC as an entity (after your guaranteed payments) would be distributed to you as the sole member, or split among partners. Any depreciation, expenses, or other write offs occur before the profit is "passed-through". As far as carrying a loss forward, I think this can happen at the personal income tax level, but I am not sure. For multiple LLCs the profit and loss is aggregated. An accountant would be more helpful at the fine details. In Connecticut, we also are subject to a Business Entity tax, which is $250.00 for each LLC entity, regardless of profit or loss.
     
  6. brunosplace

    brunosplace Senior Member
    Messages: 282

    A LLC in Michigan can be a single owner, partnership, or multi-member. As far as the IRS is concerned it is flow-through. The business entity isn't taxed. The member (s) recieving payment are, but only on the money actually passed through (after deductions, depreciation, expenses, etc). IRS form 1065 applies for partnerships, and multi-member, not sure about single member. Also Schedule K1 as previously mentioned. Hope this helps, but keep in mind you should consult with an accountant (for tax purposes)and an attorney (for liability and personnal property protection,& estate concerns) to determine what is best for your particular situation.
     
    Last edited: Feb 20, 2006
  7. DJ Contracting

    DJ Contracting PlowSite.com Addict
    Messages: 1,392

    Thanks SLSNursery and Bronosplace that was helpful and i have consulted my accountant, obviously i was used to opperating as a DBA for to long.
     
  8. repo_man62

    repo_man62 Senior Member
    Messages: 502

    That's what happens when you make those big bucks Joe! Have a great day from 80 degree Florida...:waving: