Question: What are the advantages of starting my business as a LLC?
For new businesses, I highly recommend incorporating as a LLC. Here are some items a business owner should consider:
1. It is relatively inexpensive and easy to setup by filing an articles of incorporation with your states’ corporate filing office (Secretary of State).
2. As a LLC owner, your business is a separate entity and if you are sued for negligence your personal assets are protected.
3. Unlike corporations, who are double taxed on profit, a LLC’s income and expenses pass through to the owners’ personal tax returns and the owners pay personal income tax on profits.
4. Before your business officially starts, you can deduct up to $5K in start-up costs. Any remaining costs of up to $50K can be expensed over a 15 year period. Start-up costs would be any expenses incurred such as advertising, training, salaries, etc.
5. As your business grows, it may be beneficial for a LLC to elect to be treated as a S Corp or Corporation for tax purposes. There are some benefits to becoming a S Corp (minimizing self employment taxes) or a Corporation (being taxed at a 21% flat corporate income tax rate, which is substantially lower than most individual rates).
As always, it is best to discuss your specific situation with a tax professional. Until next time!
