business advice

Whether an LLC is considered high risk depends on various factors, including the nature of the business, industry risks, management practices, financial stability, and legal compliance. Here are some considerations regarding the risk level associated with an LLC… Limited Liability Protection – One of the primary advantages of forming an LLC is limited liability protection, which shields members’ personal assets from business debts and liabilities. As a result, LLCs are genera

While Limited Liability Companies (LLCs) offer numerous benefits, they also have some potential downsides or limitations that business owners should consider before choosing this business structure. Here are some common drawbacks of an LLC… Complexity in Formation and Maintenance – Forming an LLC typically involves filing formation documents with the state, paying filing fees, and complying with state-specific requirements. While the process is less complex than forming a cor

Owning a Limited Liability Company (LLC) offers several benefits for business owners. Here are four key advantages of owning an LLC… Limited Liability Protection – One of the primary benefits of forming an LLC is limited liability protection. LLC owners, known as members, are typically not personally liable for the debts and obligations of the business. This means that if the LLC faces lawsuits or creditors’ claims, the members’ personal assets, such as their homes or savings

A business structure that can potentially face double taxation is a C corporation. Here’s how double taxation can occur with C corporations… Corporate Income Tax – C corporations are separate legal entities from their owners. As such, they are subject to corporate income tax on their profits at the federal and state levels. Corporate income tax rates can vary depending on the corporation’s taxable income and the tax laws of the jurisdiction where it operates. Shareholder Divi

Self-employed individuals may feel like they’re paying “double taxes” because they’re responsible for both the employer and employee portions of certain taxes. Here’s why it can feel that way… Social Security and Medicare Taxes (Self-Employment Tax) – Employees and employers each contribute to Social Security and Medicare taxes (collectively known as FICA taxes) through payroll deductions. For employees, these taxes are typically withheld from their paychecks, and the employe

The frequency with which a business has to pay taxes depends on several factors, including its legal structure, tax classification, and the type of taxes it owes. Here’s a general overview… Federal Income Taxes – For most businesses, federal income taxes are paid on an estimated quarterly basis. This applies to businesses that are taxed as corporations (C corporations) and businesses that pass through income to their owners (such as sole proprietorships, partnerships, S corpo

LLCs (Limited Liability Companies) can avoid double taxation through proper tax planning and choosing the appropriate tax classification. Here are some strategies that LLCs can use to avoid paying taxes twice… Pass-Through Taxation – By default, LLCs are treated as pass-through entities for tax purposes. This means that the LLC itself does not pay taxes on its income. Instead, the profits and losses “pass through” to the owners (members) of the LLC, who report them on their i

As the owner of an LLC (Limited Liability Company), you can pay yourself a salary or draw distributions from the company’s profits. However, it’s essential to understand the distinction between these two methods of compensation and how they affect your LLC’s finances and tax reporting… Salary – If you pay yourself a salary as an employee of the LLC, the salary is considered a business expense, and it’s deductible for the company. The LLC must withhold income taxes, Social Sec

Several factors can increase the likelihood of getting audited by the IRS (Internal Revenue Service). While there’s no definitive list of criteria that guarantee an audit, certain situations or behaviors may raise red flags and prompt closer scrutiny from the IRS. Here are some factors that could make you more likely to get audited… High Income –  Taxpayers with high incomes, especially those significantly above the national average for their income bracket, may be more likel

The IRS (Internal Revenue Service) may choose to audit a tax return for various reasons, and there isn’t always a single trigger that leads to an audit. However, certain factors or red flags may increase the likelihood of an IRS audit. Here are some common reasons why the IRS may decide to audit a tax return… Discrepancies or Errors –  Discrepancies or errors on a tax return, such as mathematical mistakes, missing information, or inconsistencies between reported income and re

Limited Liability Companies (LLCs) offer several tax advantages, such as pass-through taxation and flexibility in tax treatment. However, there are also some potential tax disadvantages to consider… Self-Employment Taxes –  While LLCs offer pass-through taxation, active members (owners) of an LLC are generally subject to self-employment taxes on their share of the LLC’s profits. This means they must pay both the employee and employer portions of Social Security and Medicare t

As an LLC (Limited Liability Company) owner, you can typically write off various business expenses on your tax return, subject to IRS rules and limitations. These deductions can help reduce your LLC’s taxable income and lower your overall tax liability. Here are common types of expenses that can be written off for an LLC business… Operating Expenses – Rent or lease payments for office space, retail space, equipment, or vehicles. Utilities, including electricity, water, gas, i

As an LLC (Limited Liability Company) owner, you can typically deduct various business expenses on your tax return, subject to IRS rules and limitations. Here are common types of expenses that can be written off by an LLC… Operating Expenses –  Deductible operating expenses are those incurred in the ordinary course of business to generate revenue. These may include: Rent or lease payments for office space, equipment, or vehicles. Utilities, such as electricity, water, and int

While Limited Liability Companies (LLCs) offer several advantages, such as limited liability protection and flexibility in management and taxation, there are also some potential drawbacks to consider… Complexity in Formation and Maintenance –  Compared to sole proprietorships or partnerships, forming an LLC typically involves more paperwork, filing fees, and ongoing compliance requirements. LLCs may need to file articles of organization with the state, create an operating agr

Whether it’s worth buying a car through your business depends on various factors, including your business needs, financial situation, tax implications, and personal preferences. Here are some considerations to help you decide… Business Use –  If you need a vehicle primarily for business purposes, purchasing it through your business may make sense. Business owners who regularly use a vehicle for activities such as transportation, delivery, sales, or client visits may find it b

You can start deducting business expenses as soon as your business is operational and actively engaged in income-generating activities. The IRS allows businesses to deduct ordinary and necessary expenses incurred in the course of conducting business to generate income or profit. Here are some key points to consider regarding the timing of deducting business expenses… Business Operation Start Date –  Business expenses incurred after your business begins operations are generall

Yes, an LLC (Limited Liability Company) can use TurboTax to file its taxes, depending on the LLC’s tax classification and filing requirements. TurboTax offers various software products tailored to different types of tax situations, including those for individuals, self-employed individuals, businesses, and corporations. Here’s how an LLC can use TurboTax… Single-Member LLC (Disregarded Entity) – If the LLC has only one owner (member) and has not elected to be taxed as a corpo

The Internal Revenue Service (IRS) looks for various indicators or “red flags” that may trigger closer scrutiny or an audit of a taxpayer’s return. While the IRS does not disclose an exhaustive list of red flags, here are some common ones… High Income –  Tax returns with high incomes are more likely to be scrutinized, especially if they are significantly higher or lower than the taxpayer’s previous returns or the average for their income bracket. Unreported Income –  Failure

The terms “self-employed” and “business owner” are often used interchangeably, but they refer to different aspects of entrepreneurship and business ownership. Here’s a breakdown of the key differences between being self-employed and being a business owner… Self-Employed – Definition –  Being self-employed means working for oneself rather than being an employee of another individual or company. Self-employed individuals are typically sole proprietors, independent contractors,

Deciding whether an LLC or an S corporation (S corp) is better for taxes depends on various factors, including your business’s specific circumstances, financial goals, and tax considerations. Both LLCs and S corps offer advantages and disadvantages from a tax perspective, so it’s essential to evaluate each option carefully. Here’s a comparison of some key tax-related factors for LLCs and S corps… Tax Treatment – LLC –  By default, LLCs are treated as pass-through entities for