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Brent Blanchard
Brent Blanchard, Attorney
Category: Business Law
Satisfied Customers: 1975
Experience:  Thirteen years of business law experience, from business formation to litigation
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Is it legal to have an LLC purposes only- meaning there

Customer Question

Is it legal to have an LLC for tax purposes only- meaning there is no business?
Submitted: 7 months ago.
Category: Business Law
Expert:  Brent Blanchard replied 7 months ago.
Thank you for your question.The advantages of an LLC are mainly:1. The owners can more easily keep control if it. Unlike stocks, someone suing the owner of an LLC cannot get *voting* rights or control of the LLC after getting a judgment against the owner. That personal property of the owner (the LLC) is pretty tightly wrapped up. All a creditor can get is the right to intercept the profits from the LLC instead of having that money go to the owner.2. When the paperwork is done properly and records are done properly, the LLC is not subject to separate income tax on its profits. The profits "pass through" to the owners. The owners are almost always taxed at a lower rate than an *incorporated* business would be.So for "tax purposes", avoiding "double taxation" is the most common benefit of using an LLC. With IBM which is owed by stock shareholders, IBM gets taxed on its profits, then the shareholders get taxed again on that same money when they get those profits as dividends.Perhaps the other "tax purpose" is deducting "business expenses"? That can be hazardous because the IRS (and local state tax entities in the majority of states where income tax also applies) cares very deeply about any business really, truly trying to DO business when it is spending money. The IRS rules on deductibility can be found here:https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deducting-Business-Expenses Thank you.

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