Forming an LLC – Great Tax Benefits for Small Businesses

If you still are involved in the paperwork section of forming your small business, you know that taxes are going to play a huge part of your life for many years to come. Everything has to be triple checked to avoid any mistakes with the IRS. Because of this, it makes sense to do everything you can to help yourself save some money in taxes. One way to do that is by forming an LLC. This stands for Limited Liability Company and includes many tax benefits for small businesses. One of the great selling features for many people is that there is surprisingly little paperwork, which even can be done online.

Forming an LLC for a small business basically gives them many of the same benefits and protections they would find if they formed a corporation but with one major addition. The tax benefits with an LLC greatly outweigh those of a corporation or even a sole proprietorship. The main tax benefit that draws in so many people is that you will not have to pay taxes twice. Usually, you have to pay the taxes earned by the company, and then pay the taxes you earned as an individual. With an LLC, you pay them once and then you are done with it.

Another tax benefit from forming an LLC is the fact that, regardless of what percentage of the company you own, you are not forced to pay that amount of taxes. If you owned 75 percent, you are not required by law to pay all 75 percent. Your partner or partners could equally split it or whatever you decide to do. All the IRS looks at is the expenses and losses of the company. The reason this is possible is because the IRS does not consider the actual LLC a taxable entity.

Because it typically takes a few years for small businesses to actually start turning profit, it only makes sense to save as much money as you can, especially if this is in taxes. This is why forming an LLC is such a great business move for small businesses. Even if you are an established small business, becoming an LLC still will help you because you will receive the same benefits as a new business. Forming one even can be done online, which makes the process much faster and easier than doing it the conventional way with a lot of paperwork.

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