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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10831
Experience:  Law Degree, specialization in Tax Law and Corporate Law, 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

This answer was rated:

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

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 ...

JACUSTOMER-soa38uzb- :

thanks...

JACUSTOMER-soa38uzb- :

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

JACUSTOMER-soa38uzb- :

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)

JACUSTOMER-soa38uzb- :

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

JACUSTOMER-soa38uzb- :

that is on profit

Customer:

it becomes a taxable entity

Customer:

that's right

JACUSTOMER-soa38uzb- :

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

JACUSTOMER-soa38uzb- :

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

JACUSTOMER-soa38uzb- :

ok

Customer:

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

JACUSTOMER-soa38uzb- :

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

JACUSTOMER-soa38uzb- :

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

JACUSTOMER-soa38uzb- :

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

JACUSTOMER-soa38uzb- :

thanks.

Lane and 4 other Tax Specialists are ready to help you

 

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