Hello 

 

Man, people are confused about LLCs and their tax benefits.  Let me set the record straight once more.  Some of you who are my more regular followers and subscribers to the LegaLees YouTube channel can ignore this email.

An LLC is a legal entity.  It is NOT a tax designation. For example, the IRS doesn’t know whether you have a corporation taxed under Subchapter S or an LLC taxed under Subchapter S.   Either one of the legal entities--a corporation or an LLC--can be taxed using the rules of Subchapter S of the IRS Code. 

The tax advantage of an LLC is actually remarkable.  It simply is a fact that an LLC can choose to be taxed using any of the tax categories the IRS has for businesses.  You simply choose how you want to be taxed. 

How you want to be taxed isn’t dependent at all upon the fact that you have an LLC.  Your choice will mostly be determined by how you make money in the LLC.  The other factor is how many members (owners) of the LLC there are. 

Only single member LLCs can be taxed as sole proprietorships, but multi-member LLCs can’t be taxed as sole proprietorships.  In some cases, a husband and wife are considered a single member, even though they have separate ownership in the LLC.  Only multi-member LLCs can be taxed as partnerships.  Single-member or multi-member LLCs can be taxed under Subchapter S or Chapter C. 

The legal set up is an attorney problem.  The tax choice is an accounting problem.  Don’t let attorneys govern your tax choices, and don’t let accountants prepare your legal documents.  The two don’t cross.  In fact, in many states it is illegal for an accountant and attorney to office together.

If you could really match up an attorney and an accountant, that would be a dangerous marriage.  That’s exactly what I have done with my friend, Ben Rucker (accountant, former IRS special auditor/agent, and enrolled agent), when we prepared the Mastering Real Estate Tax Strategies course.  We have just finished the whole course. You haven't had an opportunity to hear about the course yet, but it is cool. We are going to do a webinar on it in the next few weeks, so watch for your invite to the webinar.

In the meantime, if you want to know more about the tax “advantages” of an LLC, check out my new YouTube video on our LegaLees YouTube Channel.