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7 Tax Strategies: Having Your LLC Taxed as a Corporation has Major Tax Advantages
A business operating with an LLC can elect to be treated as an S-Corp or C-Corp for tax purposes. This can help you save thousands in taxes.
How does the taxing LLC as Corporation Strategy works?
The strategy to pursue depends on your total income. Here is a brief summary of how it works.
S-Corp
As an S-Corp you will be treated as both an employee and a shareholder of your company. You will have to assign yourself a “reasonable compensation”. This is another way to say that you have to pay yourself something reasonable based on the industry average. Here is an example.
By moving operations off the individual’s tax return, the 15% self-employment tax is eliminated on earnings up to $128,700 and 2.9% on income greater than $128,700. Savings calculation is based on the difference between reasonable compensation and income up to $128,700 times 15% and 2.9% on difference above $128,700.
LLCs are relatively easy to form and maintain. However, it’s important to fill out the paperwork properly. Let’s talk about determining if your business would benefit from starting an LLC:
Still Overpaying Taxes to the IRS?
We’d love to help your small business stop overpaying in taxes to help you start planning for your retirement!
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