Who here has set up an LLC for their website/s

Unless you elect with the IRS to be taxed as a corporation then the income from an LLC is pass through and taxed at the same rate as your regular income. Additionally you have to pay self employment taxes of 15.3% on the LLC profits.

There is not a significant tax advantage to a LLC.

 

I don't know why everyone thinks a sole proprietor can't write off things like hosting, advertising etc... I've been doing it for years. It's a legit expense.

 

Yep. Unless you're already making over $97,500 per year (in 2007, higher in 2008), in which case your self-employment tax is only the 2.9% for Medicare.

 

No, that can't be right... at all...

 

I have an LLC

 

you sure about this? I dont think it is correct. Profit or loss for an LLC is just tacked onto your personal tax return, and then THAT total determines your tax bracket.

Do you have a source to back that up? I'll do some digging and see what I can find...

 

Yeah I am 95.89367% sure that whatever your LLC makes gets added right on to your personal income, and the total number then decides your tax bracket. So you cant form an LLC to bring in some profits at a lower tax bracket. No way the government would have a loophole like that.

But I am assuming that you have a single member LLC? partnership might be different, but I doubt it.


from entrenpenuer.com:

www.entrepreneur.com/money/taxcenter/taxstrategiescolumnistdavidmeier/article72134.html

"For individual business owners, the LLC offers a one-person LLC form, which is taxed as a sole proprietorship. In addition to offering the owner all-important limited personal liability exposure, the LLC retains important tax benefits of the sole proprietorship, such as: owner compensation in the form of distributions of profit, which are taxed at the individual owner's potentially lower marginal tax bracket (the tax rate applicable to the next dollar of taxable income the owner earns); and pass-through of business losses, offsetting the owner's other nonbusiness income."

And:

www.surfersam.com/articles/corporation.htm

"The LLC, or Limited Liability Company, is a business structure created by states. The LLC gives the owners the legal protection of personal limited liability for business debts and legal claims, just like a corporation. However, the LLC does not pay income tax on its earnings. Instead, the profits and losses of the business are reported on the personal income tax returns of the owners. This “pass-through” feature solves the problem of double taxation that occurs with a general corporation."

And:

www.anysubject.com/limited-liability-company-llc-set-up-a-limited-liability-company-formation.asp

"Let's begin with an understanding of what the limited liability company is. Basically it is a partnership among its owners, who are called "members". The LLC is like a limited partnership (and an S-corporation), because it is a "pass-through entity"--each partner's or member's share of the net gain or loss for the year "flows through" to the individual tax-payer's 1040 individual tax return. There is no separate tax to which the LLC itself is subject. On the other hand, the LLC is also like a corporation, because unlike the limited partnership--which requires a general partner, who is responsible for all results of all decisions and actions of the partners--all its owners benefit from limited liability."

And:

www.nolo.com/article.cfm/objectID/D557CF7D-3BAE-4550-93F37C97C455A2D4/111/182/241/ART/

Corporations are taxed differently than other business structures: A corporation is the only type of business that must pay its own income taxes on profits. In contrast, partnerships, sole proprietorships, and limited liability companies (LLCs) are not taxed on business profits; instead, the profits "pass through" the businesses to their owners, who report business income or losses on their personal tax returns.

 

You're right WhatsTheRent. If the OP keeps his business operations the same the LLC would just be a "pass through entity" where profits are passed through to his personal income. (Which avoids double taxation...)

That's why I said the big reason for the switch would just be for limited liability.

 

Correct. Even then it doesn't HAVE to be. It gets more complex when you have an operating agreement.

LLC is a MUST for all business. Especially online. There is nothing like the protection you get, and not having to worry about things later.

I would recommend talking to a CPA, or accountant to make sure you are doing it right, and get Quicken, or Quick books.

This is by far the best $350-500 well spent.

 

Correct.

The advantage is in PROTECTION OF YOUR PERSONAL PROPERTY. Not taxes. If you are looking for tax benefits, you should look at an S-Corp.

 

Here you go...

http://www.ssa.gov/pubs/10003.html

If you're self-employed, you are responsible for both the employee's and employer's share of social security and medicare taxes.

Medicare is 2.9% of all earnings.
Social Security is 12.4% of earnings up to the Taxable Wage Base ($102k in 2008). Any earnings over that don't get hit with soc. sec. tax.

This is all in additional to your regular federal, state and local income tax.

 

I live in utah,, can I incorporate in nevada? How the things work? I am considering to form an llc because of my immigration status,, international can't have a social security.. -_-

 

Yes, you just need a registered agent in Nevada (basically someone to maintain a PO Box, logistics, etc.) Some business formation companies that help you with the paperwork also offer registered agent services.

Google "form llc" and "registered agent nevada" and you should find plenty of info.

 

if i have a llc and agent in wyoming, (btw from the research ive done looks like a better place than nevada to have a llc), but live and am on the internet in california though im not selling anything here, would i have to pay the franchise tax for california?

im just wondering becuase the franchise taxes in california are killer compared to other states

 

You can incoporate in any state you wish. Im currently LLC'd in FL. No real biggie and only cost $160 at start up, and minimal annual costs. The paperwork and accounting is very straight forward with 1 or 2 people. I have read else where like someone mentioned that a S-corp could yield more in tax savings, but the paperwork increased with an S or C corp over an LLC. In the end, its just a matter of staying organized and you will be fine.

 

LLC is the easiest way to go particularly if you want to protect yourself. We use a Delaware LLC for most of our business activities.

Incidentally, if you're a foreigner then you don't have the same worries when you incorporate in the U.S. in Delaware or Nevada. You pay your yearly fees to the State and it's quite easy. My husband had a couple of companies in Delaware before moving here from France and he really enjoyed a major savings in taxes

 

It doesn't matter where you are, just where the business is. If the business is in Wyoming, it would pay taxes there. Personal income you get from the business would be taxed in CA.

 

Yes, but you might be surprised how "where the business is" is defined. Having a nice cozy PO box in Wyoming with a few scraps of official paper piling up (cue harmonica and a tumbleweed) ain't gonna cut it if the CEO is doing 90% of the actual work out of his den in Rancho Cucamunga, CA [sp.]. It's called "nexus" and you can bet CA knows the word.

Besides CA doesn't charge sales tax on intangible items, like digital products. So why people are so eager to cheat a state that is so unique and wonderful a business landscape, is beyond me.

/climbs off soapbox

 

I can answer that. It's called $70-150 to sign up a business, plus a $800 yearly tax AND a fee, regardless of how much you make. It also because the FTB in California is next to impossible to reach live (if you don't believe me, try it, 800.852.5711). Have fun waiting. Post your estimated wait time here after you call. Mine's usually about 45 minutes, then, they hang up on you, and tell you to call later.

"Registration of a limited liability company (LLC) with the California Secretary of State (SOS) will obligate an LLC that is not taxed as a corporation to pay to the Franchise Tax Board (FTB) an annual minimum tax of $800.00 and a fee based on the annual total income of the entity. The tax and fee are required to be paid for the taxable year of registration and each taxable year, or part thereof, until a Certificate of Cancellation is filed with the SOS."

 

Actually, no, I'm not surprised at all. I never said a PO box in another state was all you needed.

What one needs is a real-life attorney and accountant who know all the details of each unique situation