Will an LLC Help Lower Your Business Taxes?

Whether it’s driven by a desire to escape self-employment taxes or looking to avoid that “double taxation” whammy, small business owners ponder which legal structure is right for their business and financial situation.

The LLC is often associated with “pass-through taxation,” meaning the LLC itself does not pay taxes. Rather, income from the business is passed to the company’s owners (aka members) who then claim these profits on their personal tax forms.

However, the LLC actually offers flexibility when it comes to federal tax treatment. This is because the LLC is an entity created by state statute. The IRS allows the LLC to be taxed as a corporation, partnership or sole proprietor, depending on elections made by the LLC and the number of members.

Under federal law, an LLC is classified as one of these types of taxable entities:

Single-member LLC as a “disregarded entity”

In this case, you’re the sole owner of the LLC and you report business income on your Schedule C tax form, as well as pay self-employment tax on the profit on the Schedule SE form. This is what’s typically called pass-through taxation, as the LLC does not need to file any tax forms. You will only need to pay self-employment taxes if you are engaged in an active trade or business; for example, if you provide a service to clients or sell a product. If you formed an LLC for a passive activity, like real estate investments, you will not have to pay self-employment tax on the profits (and in that case, you’d report your passive profits on Schedule E).

For example, Anne is a wedding photographer and formed an LLC for her business. The LLC earned $42,000 in profit this year. She will pay taxes on this $42,000 at her individual tax rate, as well as pay self-employment taxes (currently 13.3 percent for the calendar year 2011 for the first $106,800).

Multiple-member LLC as a partnership

With this arrangement, there are multiple members who own the LLC as partners. Unlike the single-member LLC described above, in this case, the multiple-member LLC reports its business income on a separate 1065 partnership tax return. Then, each partner pays self-employment taxes on their share of the partnership profit on the Schedule SE tax form. As with the single-member LLC, self-employment taxes only need to be paid if the LLC engages in an active trade or business.

LLC as a C corporation

An LLC can elect to be treated as a corporation for tax purposes by filing Form 8832 with the IRS. In this case, the LLC files a corporate tax return 1120. And the LLC profits are not subject to self-employment taxes. However, if the LLC profits are distributed to LLC owners in the form of dividends, those dividends are taxed again at the 15 percent qualifying dividend rate. The LLC treated as a C corporation is also responsible for payroll taxes on any wages paid to LLC members who work in the business.

For example, Paul owns a consulting company which earned $80,000 in profit. As a C corporation, the business would pay $27,200 in taxes on this income (assuming a 34 perent tax rate). If Paul then takes home that profit as a dividend, he would also owe taxes (at the 15 percent qualifying dividend rate) on the dividend payment.

LLC as an S corporation

In this case, the LLC elects to be treated as an S corporation. The S corp files an 1120S tax return, but the company’s profits are not subject to corporate income tax (like they are in the C corporation). Instead, individual LLC owners are taxed on their respective shares of the company’s profits (and profits are not subject to self-employment tax). If an LLC owner works in the business, they must be paid a reasonable wage for their activities and the LLC must pay payroll taxes on these wages.

Let’s say three sisters started an organic ice cream business and each own one-third of the business. They form an LLC and elect to be taxed as an S corporation. In the first year, their business earns $90,000 in profit. The ice cream business does not pay income tax on the profit. Instead, each sister includes her share of the profit ($30,000) in her taxable income on her individual tax return. And if their business lost $45,000 in the first year, each sister would include a $15,000 loss in her individual taxable income.

Choosing the right tax entity for your LLC is a weighty issue and will ultimately depend on all the unique aspects of your particular business needs, vision and circumstances. Investigate your options and stay on top of changing tax developments on both the federal and state levels that could affect your taxes.

Most importantly, know that the LLC is great for small business owners who want liability protection, but would prefer minimal formality (and paperwork). It’s also a perfect structure for a business with foreign owners, as anyone (C corp, S corp, another LLC, trust or estate) can be an owner of an LLC. So take some time and educate yourself on the benefits of forming an LLC and what tax treatment is best for you. After all, both you and your business are worth it.


Image from Pixelbliss/Shutterstock

More in: Incorporation

[“source-smallbiztrends”]

10 Apps to Assist with Your Small Business Taxes

small business tax apps

Tax time is almost here. And as with almost anything else in your small business, there are apps designed to get you through it.

You can use some apps for filing your tax returns. Others can be used to keep you better organized throughout the year — by doing things like tracking your expenses.

We’ve identified 10 small business tax apps you may find useful as a small business or microbusiness owner, an entrepreneur, or a solopreneur.

Small Business Tax Apps

FreshBooks

Many small business owners may need help with accounting and an organized accounting process can really prove beneficial at tax time. FreshBooks is one of several all-in-one accounting apps used for tracking expenses, producing invoices for your customers and tracking payments.

FreshBooks is available on Android and iOS devices. New users get a free 30-day trial. Monthly plans after the trial period start at $19.95 per month, according to the FreshBooks website.

TurboTax Home & Business

This is probably one of the most recognizable names on the list. TurboTax, from Intuit, offers an app for small business owners that costs $99.99. That price includes the cost of one e-file of a tax return.

The online app claims that using it allows you to identify and get the most money for your tax deductions, especially those specific to small businesses. You can also use it to create W2 and 1099 forms for your employees. Throughout the year, you can use this app to help track expenses, too. There is also a feature that accounts for value depreciation of your assets.

TaxCaster

Intuit also offers a companion app for your mobile device called TaxCaster. The app is designed to give you a glimpse at any possible tax return you can expect.

IRS2Go

This app comes directly from the Internal Revenue Service. The IRS2Go mobile app is available for both iOS and Android devices. The app is supposed to allow you to track your refund. It also provides you with tax prep information. And you can request tax return information and account transcripts through the app.

When the IRS receives your request through the app, they’ll send you the information you requested in the mail.

MoBu

This is a Windows app designed to run on desktops or mobile devices. The cost for the MoBu app is $6.99, but there is a free version with limited capabilities.

Like many of the apps on this list, MoBu uses charts and graphs to give a picture of your finances. Although MoBu is marketed toward personal finance, self-employed people can also use some of the features.  This is how a description on the Microsoft app store describes it:

“When other applications only offer you to enter and track your expenses and income, MoBu lets you in addition define expenditure and savings budgets, and fully analyze your financial wealth and simulate the future.”

Mint

This is a free app from Intuit Inc. that has the sole aim of tracking and organizing your expenses. Mintorganizes your expenses to let you know where your money is being spent. It presents this information in easy-to-read charts and graphs.

Mint would be a good app for any entrepreneur keen on controlling expenses. Forecasting features allow you to get a glimpse at future expenses and savings.

inDinero

This app is designed for both desktop and mobile use. inDinero claims it can perform all your financial tasks, from your accounting to tax returns. The app uses graphs and charts on an online dashboard to present your business’ financial information.

inDinero offers three levels of paid service, based on the size of your business. It charges a flat fee. But not just any business can use this app. inDinero requires that you request an invite to use its services. It will review your application.

TaxACT

This popular tax software has online apps for small businesses filing their federal and state taxes. TaxACTsays small business owners can file their 1065, 1120, 1120S and 1040 Schedule C returns using its app. A free trial has limited services but does allow you to file one federal return for free through e-file. Premium offerings start at $12.99 and include assistance with filing your business taxes.

Record keeping, or a lack thereof, could make tax season even more arduous on small business owners. Below are several mileage, receipt tracking apps you can use to accomplish this.

Expensify

This is a free app you can use on desktop or mobile. Expensify has a service designed specifically for businesses. This app allows you and your employees to track your expenses by taking photos of receipts. It also tracks employee mileage through GPS.

This app even allows you to reimburse employees for their expenses from inside Expensify. The app also integrates with some popular accounting software, which should come in handy at tax time.

iDonatedIt

If you’re a charitable person or have donated anything in the course of a year, use the iDonatedIt app to calculate the value of that donation. If you track your donations throughout the year using this app, accounting for them at tax time should be easier. It is available for both Android and iOS devices.

While some of these small business tax apps are free to use, others obviously require an up-front cost. But remember, as tax professional J.K. Lasser points out, the money you spend on a tax prep app like those in our list is tax deductible.

Using App Photo via Shutterstock

[“source-smallbiztrends”]

AMD Radeon RX 480 officially released in India Priced at Rs. 28,990 before Taxes and responsibilities

AMD Radeon RX 480 Officially Launched in India Priced at Rs. 28,990 Before Taxes and Duties

HIGHLIGHTS
AMD’s modern GPU is being placed as ideal for 1440p gaming and VR
snap shots cards with AMD’s reference cooler layout will release first
Pricing is probably to be drastically higher in India than across the world
AMD has taken the wraps off its modern GPU, the Radeon RX 480. The launch of the RX 480 marks the debut of AMD’s new Polaris structure, after many years of iterative refreshes to previous chips. picsplaying cards based totally on the new GPU will goal game enthusiasts within the valuetargeted mid-variety segment.

The corporation is focusing on delivering clean VR reviews to users at all budget stages. Radeon RX 480 cards will also be aimed toward gamers who target a playable decision of 2560×1440 with qualitysettings grew to become up. The GPU, codenamed Polaris 10, is manufactured the usage of a new 14nm lithography process which facilitates lessen warmness and strength intake.

The Radeon RX 480 is a full implementation of the Polaris 10 layout, with 2304 move processors divided into 36 clusters. Its base clock velocity is 1120MHz however it could attain bursts of as much as 1266MHzwhilst wished. peak overall performance is rated at five.8 Teraflops. both 4GB or 8GB of GDDR5 RAM willsit down on a 256-bit reminiscence bus. total power draw is rated at 150W, and AMD guarantees 2.8Xbetter overall performance consistent with Watt in comparison to Radeon R9 2 hundred collectionplaying cards.

AMD’s release notes spotlight the brand new architecture‘s potential to deliver help for emergingDirectX 12 and Vulkan requirements, which allow recreation programmers tap into hardware talents at a very low stage, reducing driver overhead.

amd_radeon_rx480_slide_amd.jpg
photographs cards following AMD’s reference design could have a blower-fashion cooling shroud, threeDisplayPort outputs and one HDMI output. handiest a single 6-pin PCIe power connector can be required.

AMD has additionally introduced new software program with this launch. An overhauled Radeon softwareapp introduces new overall performance controls, and a new overclocking software called Radeon WattMan lets in customers to tweak voltages, frequencies and fan speeds, and song usage throughoutvarious metrics.

With this release, AMD is positioning its top single-GPU card for this era well under the flagship degree that Nvidia has hooked up with the especially powerful GeForce GTX 1080 and 1070 (evaluate). the upcoming Radeon RX 470 and 460 GPUs will cater to 1080p gamers and eSports fans respectivly, and mustlaunch in the coming months. destiny products based at the separate Vega architecture will bolster AMD’s overall performance competencies at the high give up when they’re launched early next 12 months.

AMD has introduced pricing of Rs. 28,990 for reference Radeon RX 480 photographs cards with 8GB of GDDR5 RAM in India, but that discern comes with a surprising disclaimer which states “Please note that theintroduced price does not element responsibility, freight, distribution margins, store margins, local taxesetc.” thinking about that the global price of $239 works out to approximately Rs. 16,120, there ought tobe no cause for this type of huge fee hole. Asus, Sapphire, Gigabyte, MSI and PowerColor might bereleasing reference Radeon RX 480 playing cards as well as versions with their very own coolinganswers, but shares aren’t expected to be available within the market for some weeks, in step with a channel source devices 360 spoke with.

Indian pricing for reference Radeon RX 480 cards with 4GB of RAM has no longer been released, but theworldwide rate is $199 (about Rs. thirteen,420). AMD had previously indicated channel pricing of Rs. 20,000 for the Radeon R9 380X, the very last retail charge of which became out to be Rs. 25,999. If this iswhatever to move by, AMD’s modern merchandise will not be priced competitively in comparison to Nvidia’s GeForce GTX 970 and the center tier of the GeForce GTX one thousand range, so as to certainlyrelease before the end of this yr.

download the devices 360 app for Android and iOS to stay updated with the contemporary tech news, product evaluations, and distinct deals at the popular mobiles.

Tags: AMD, AMD Radeon, AMD Radeon RX 480, AMD Radeon RX 480 functions, AMD Radeon RX 480release, AMD Radeon RX 480 overall performance, AMD Radeon RX 480 fee, AMD Radeon RX 480 price in India, AMD Radeon RX 480 specs, gaming, Radeon RX 480, VR

Nasscom proposes start-ups be exempt from direct, indirect taxes

Nasscom also sought steps to increase investments in start-ups.

Nasscom also sought steps to increase investments in start-ups.

New Delhi: Software lobby Nasscom on Wednesday proposed that all start-ups be exempted from direct and indirect taxes to reduce compliance burden and cash outflows. In its pre-budget recommendations submitted to the finance ministry, Nasscom also demanded removal of so-called angel tax levied on capital receipts.

It also recommended allowing companies to carry forward losses even if there is change in ownership structure, if it is for capital infusion in the entity.

“Policy regulations like ease of compliance, reliance on self-certification instead of audits, tax exemptions for startups will allow entrepreneurs to devote their time, energy and resources to build upon their innovative ideas,” said R. Chandrashekhar, president, Nasscom. “With the number of tech start-ups in India growing over 40% over the last year, these startups can potentially develop innovative solutions to address the development needs of the country as startups focus on development solutions for health, infrastructure and energy among others.”

Nasscom also sought steps to increase investments in start-ups.

“Investments in early-stage startups are high-risk and there is a need to rationalise tax rates for investors,” it said. It recommended harmonizing capital gains tax for resident investors with non-resident investors and tax rates for angel investors, allowing proprietary domestic capital to set up a limited liability partnership as an investment vehicle as well as exemption of capital gains tax on income from sale of equity of a start-up if the proceeds are reinvested in securities of new start-ups.

[“source-Livemint”]