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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4016
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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Hello, What is the difference between a LLC taxed as a C-Corp

Resolved Question:

Hello,

What is the difference between a LLC taxed as a C-Corp and a traditional C-Corp? Would the profit of a LLC taxed as a C-Corp be included into my "Global" income if I choose to leave it in the business? (This matters since I have a US LLC and also live in Netherlands and work as a Sole proprietor)

Any help and/or direction would be very much appreciated.
Cheers
XXXXX XXXXX
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Customer:

hi, I can help with this

Customer:

Just means that you started out as an LLC and then did an election to be taxed as a c-Corp

Customer:

No ...

Customer:

if it's in the C-Corp as retained earnings it's not taxed as a pass through (as the default LLC would be)

Customer:

that the diff ...

Customer :

thanks...

Customer :

quick question

Customer:

In LLCs that haven't mad an election to be taxed differently, partnerships and S-Corps the profit is passed through and taxed no matter what, even if you don't physically distribute it

Customer:

In a C-corp, you decide after you've made a profit, whether you want to book it to retained earnings o pay it out as a dividend

Customer :

so there is absolutely no difference financially between LLC taxed as a C corp and a traditional Corp? How about legally?

Customer:

onlt then, as a dividend, is it taxed (with C-Corp)

Customer :

I understand that the LLC taxed as Corp had better management options... that is why I am asking

Customer:

An LLC, is much more flexible, You can do almost anything you want, as long s it's in the operating agreement

Customer:

BUT, once you elect to betaxed as a C Corp, the C-Corp tax rules apply, the C-Corp now has its own tax return and pays taxes at Corporate rates

Customer:

And of curse theres the double taxation issue

Customer :

that is on profit

Customer:

it becomes a taxable entity

Customer:

that's right

Customer :

does the state corp tax apply if I do not live or do business in that state (wisconsin)

Customer:

c-copr pays its own taxes, then when you distribute that as dividends, you as the shareholder, pay tax personally

Customer:

the state of incorporation for the C-corp is where the C-Corp pays its taxes

Customer:

its state taxes

Customer :

ok... cool. Thanks very much. Now I just need to decide if its worth staying in Wisconsin or moving the Business to Wyoming

Customer:

I unerstand

Customer:

Just a sec, let me show you something

Customer :

ok

Customer:

Finally, this one's geared for retirement, but has some useful information for comparing back and forth:

Customer :

ok... great. I will check it out. I was initially thinking Nevada but I kept seeing mention of Wyoming.

Customer:

Yes Nevada and Wyoming both no State income taxa

Customer :

I am looking to keep my profits in the business while keeping my income low... reinvesting the profits into growth

Customer:

Also in Wyoming, Wyoming is a “fractional assessment” state. This means their property tax applies to only a fraction of the full market value of property.

Customer:

C Corp's the way to do THAT

Customer:

C Corps also allow for more fringe benefits

Customer :

cool... I am definately subscrbing to this service :)

Customer :

thanks.

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4016
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.

 

Thanks so much, Jason

 

 

I've been working with business owners for over 25 years.

 

 

Quick additional tip (might be stating the obvious) Make use of a SEPP or solo 401(k) ... every dollar is a deduction, but you keep it for your retirement!

 

 

To ask for me again, just go here

 

 

http://www.justanswer.com/profile.aspx?PF=1929974&FID=20

 

 

and type your question into the question box

 

 

 

Thanks again,

Lane

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