How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Brent Blanchard Your Own Question
Brent Blanchard
Brent Blanchard, Attorney
Category: Business Law
Satisfied Customers: 1975
Experience:  Thirteen years of business law experience, from business formation to litigation
Type Your Business Law Question Here...
Brent Blanchard is online now
A new question is answered every 9 seconds

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: 1 year ago.
Category: Business Law
Expert:  Brent Blanchard replied 1 year 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: Thank you.