To avoid having to pay taxes on what is in your savings and checking account?
2007-12-31 02:24:47 · 3 answers · asked by BlackRepublican 2 in Business & Finance ➔ Taxes ➔ United States
To rephrase the above answers slightly, you never pay tax on what you have in the bank. You pay tax based on the accounting profit or loss sustained by the LLC.
It is possible to have good cash flow and still have a loss for tax purposes. Conversely, a company can really struggle for cash and still have a taxable profit.
If you are thinking of buying equipment to possibly claim either depreciation or 179 deductions, its probably too late now. Even if you made a purchase today, what counts is the date placed in service. It would be hard to convince the IRS that equipment was used for business on New Year's Eve.
2007-12-31 03:42:38 · answer #1 · answered by taxreff 7 · 1⤊ 1⤋
The owners of an LLC have to pay a tax on the income whether or not that income is withdrawn or left in the company. You should reinvest earnings if it is the correct business decision regardless of the tax consequences. If the LLC can benefit from the investment, e.g. by investing in more equipment, getting more clients, or growing, then it is wise to make the investment.
2007-12-31 02:50:27 · answer #2 · answered by Anonymous · 2⤊ 0⤋
An LLC is a disregarded entity.
If you did nothing else to form the LLC, you will file either as a sole proprietor as a partnership.
What you are proposing is to go out and buy qualifying assets that you can take in the first year as depreciation. Nothing else will really lower your tax bill and I wouldn't want to make such a decisions in the next 12 hours. This is the kind of plan that you make with your accountant's advice.
If you guess wrong as to what to buy, you can end up with no money left to pay the unchanged tax bill.
2007-12-31 02:47:21 · answer #3 · answered by Anonymous · 0⤊ 0⤋