Taxes On LLC
Hi everybody. I hope someone can give us tips.
Me and 2 partners are planning to form an LLC in order to buy some properties to hold and have, in the long term, some rent income.
We know that the IRS tax us individually and not the company, but we are afraid we are going to be taxed for the money earned and that is in the LLC accounts waiting for the next biz opportunity.
Are we correct?
Also we know that tax brackets are higher for individuals than for companies, so maybe it is better to form an C Company than LLC?
We are going to meet some attorneys in 3 weeks, but we like to have some good info to be prepared.
Thanks.
ariera
_________________
[ Edited by ariera on Date 07/02/2004 ]
I would recomend talking to a CPA, from what I understand an LLC is fine for passive income, an S-Corp is better for flips
An LLC is considered to be a "pass-thru" entity, which means that the taxable income is "passed thru" to your individual income returns. So, the answer to your first question is typically yes. You will be taxed on the profits even if you retain the cash/profits in the LLC. This should be part of your cash management planning, including the use of partial distributions of profits and/or short-term debt.
There are positives and negatives with each type of entity as far as tax planning is concerned. You should discuss all of the alternatives with your attorney in great detail to make sure that you have the best possible structure.
Best wishes.
[addsig]
Thanks for your information. That confirms our scarce knowledge on the subject.
I think the meetings next week are going to be very helpful to learn more and will lead us to better tax planning.
I will post the results next week to help somebody else.
Thanks again.
[addsig]