Should I form a LLC?

[zacharie101]

I have a full time job and I also earn passive income online. I was wondering if by setting up an LLC, will it help reduce taxes when I file?

I live in the state of Florida and I have no employees.

 

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[Soleo]

I have a full time job and I also earn passive income online. I was wondering if by setting up an LLC, will it help reduce taxes when I file?

I live in the state of Florida and I have no employees.

DISCLAIMER: I AM NOT AN ACCOUNTANT OR LAWYER. INFORMATION PROVIDED IS BASED ON MY UNDERSTANDING ONLY. CONSULT WITH AN ACCOUNTANT OR LAWYER IS ENCOURAGED.

I'm not sure if they are different for state taxes, but for federal any "income" will be applied together. Example you're job pays you $50,000 and you earn $25,000 online. By IRS standards you will be in a tax bracket that falls under $75,000. This may put you in a higher tax bracket. I would be interested from hearing from an accountant.

With an LLC, the LLC gets taxed; however, you only add to your personal taxes based on what you "take home". Using example above, if you kept $5,000 and left $20,000 in the company, you would only be liable for $55,000. Just remember your company would have to pay taxes on what it made too so you're $25,000 wouldn't be that after IRS collected.

Now, I highly recommend that any business forms a LLC or INC. I don't know what you do, but ask yourself "Can I ever be sued?". If the answer if "yes", then get some protection. Without an LLC they can come after your "company" and your personal assets.

 

[zacharie101]

DISCLAIMER: I AM NOT AN ACCOUNTANT OR LAWYER. INFORMATION PROVIDED IS BASED ON MY UNDERSTANDING ONLY. CONSULT WITH AN ACCOUNTANT OR LAWYER IS ENCOURAGED.

I'm not sure if they are different for state taxes, but for federal any "income" will be applied together. Example you're job pays you $50,000 and you earn $25,000 online. By IRS standards you will be in a tax bracket that falls under $75,000. This may put you in a higher tax bracket. I would be interested from hearing from an accountant.

With an LLC, the LLC gets taxed; however, you only add to your personal taxes based on what you "take home". Using example above, if you kept $5,000 and left $20,000 in the company, you would only be liable for $55,000. Just remember your company would have to pay taxes on what it made too so you're $25,000 wouldn't be that after IRS collected.

Now, I highly recommend that any business forms a LLC or INC. I don't know what you do, but ask yourself "Can I ever be sued?". If the answer if "yes", then get some protection. Without an LLC they can come after your "company" and your personal assets.

Thanks. So, is tax benefits from forming a LLC a myth? You mentioned my company would still be liable for taxes. Does that mean I will still pay the same amount in taxes with or without forming an LLC?

The main reason I thought about forming an LLC is for the potential tax breaks. Please correct me if i'm wrong.

 

[Soleo]

Thanks. So, is tax benefits from forming a LLC a myth? You mentioned my company would still be liable for taxes. Does that mean I will still pay the same amount in taxes with or without forming an LLC?

The main reason I thought about forming an LLC is for the potential tax breaks. Please correct me if i'm wrong.

I could be wrong but the only tax benefits you get from forming an LLC are:

Cost of business - basically you can claim necessary purchases used for your business.

Corp vs LLC - if it's between these two you get to avoid the "double taxation" you get from corporations.

And actually, I think I messed up my initial post by saying your company gets taxed and so do you.

I don't know if any other

Again, I could be wrong but those are the only two benefits I know.


"The Internal Revenue Service (IRS) does not recognize an LLC for tax classification purposes, so there is no federal tax deduction unique to an LLC. But an LLC does offer specific tax advantages: “pass-through” taxation that avoids the double tax of corporate profits, and a choice on how to be taxed. For a single-member LLC, the company is a “disregarded entity” indistinguishable from the owner, and taxed as a sole proprietorship. Similarly, multimember LLCs are generally taxed as partnerships. In both cases, profits are reported on each member’s personal tax return. The member’s share of profits are subject to self-employment tax, but the company itself is not taxed on its total profits, as would happen with a corporation. But an LLC can “elect” to be taxed as a corporation, which can produce savings in certain situations by treating profit distributions to members as dividends not subject to self-employment tax. Such a choice, however, can have complicated repercussions, and shouldn’t be made without the advice of an accountant." ~online source

 

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[Soleo]

I will try to reach out to our accountant tomorrow to see if he can offer me a little advice on it.

Can't make any promises he will tell me without wanting to do a consult but I will ask him.