Limited Liability Corporation

The Limited Liability Company (LLC) is similar to an S-Corporation, but again, with some differences.

The LLC has members rather than shareholders and is not bound by the formalities of meetings, meeting minutes and stock ownership. Many choose LLCs because they are simple to operate and have the “pass-through” characteristics for tax purposes without the burden of encumbering the 15.3% self-employment tax.

“NOTE” Let me caution you out there, the IRS is going after this Self Employment issue because many LLCs are not paying any salaries to any of their Managers and/or Managing Members. Because of this, the IRS has begun treating LLC pass through like schedule-C income when auditing a taxpayer that is in violation.

California Beware

The IRS won the day. This pass-through benefit has ceased to exist and the 15.3% Self Employment tax will apply in most cases!

There are still cases pending before the courts, but the IRS seems to be setting precedence. You do not have these issues with corporations as long as there is a reasonable salary paid.

All three entities provide Liability Protection and tax benefits. No one should ever be in business without at least one of these structures set in place. Always remember, structure is everything, especially when you are protecting everything you have worked for your entire life!
  1. Limited Liability Corporation
    Limited Liability Corporation
    Best SHORT TERM Investment