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For a small business starting out (LLC partnership) what tax

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For a small business starting out (LLC partnership) what tax structure would you recommend for a business that intends on keeping the majority of its profits within the company (to further invest in its growth).
Submitted: 3 years ago.
Category: Tax
Expert:  Lev replied 3 years ago.

LEV :

Hi and welcome to Just Answer!
Selecting C-corporation tax structure would allow the business to pay less taxes. The corporate tax rate is 15% of net business income up to $50,000. Shareholders who are employee of C-corporation receive wages as compensation for their services. Wage expenses paid by C-corporation are deducted for income tax purposes.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22978
Experience: Taxes, Immigration, Labor Relations
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Customer: replied 3 years ago.
Would you recommend the C-Corporation Tax Structure of the standard pass through structure in this case? If a C-Corporation tax structure is selected would the business income that remains in the business be regarded as income on the LLC's Member's tax return. (As in would it be considered an income on the part of the LLC members)
Expert:  Lev replied 3 years ago.
The C-Corporation is NOT pass through structure - it is a separate legal and taxing entity.
Shareholders (not members) own shares of the C-Corporation.
The C-Corporation may - but not required - distribute all or part of its income to shareholders as dividends - which will be taxed twice - on the corporate level and to shareholders.

In case of partnership - which does not pay income taxes - taxable income is passed to partners and taxable to partners - regardless if it is distributed or retained by the partnership.
Lev, Tax Advisor
Category: Tax
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Customer: replied 3 years ago.
Sorry, Just to clarify, What I mean is that this is for an LLC and I am wondering on the LLC's tax structure since it could be taxed as a corporation.
Expert:  Lev replied 3 years ago.
The LLC is not a tax structure - this is legal structure created based on the state business law - and the law is different in each state.
The LLC might be treated differently for tax purposes. By default - for federal tax purposes - in most situations it is treated as a partnership.
Generally owners of the LLC may choose different tax structure - C-corporation, S-corporation, non-profit organization, etc.
Please feel free if you need any details.
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22978
Experience: Taxes, Immigration, Labor Relations
Lev and 7 other Tax Specialists are ready to help you

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