In most states, entrepreneurs and investors will find they are best served by forming a limited liability company, or LLC, as the legal entity for their business.
Why? Businesses tend to attract lawsuits, and protecting your other assets, such as your home and stock portfolios, from a lawsuit against your business is essential.
One thing many business owners don’t understand about LLCs is that you can have an LLC but choose to be taxed as an S Corporation. It’s a simple election to make and one that your CPA can complete for you very quickly.
Why be taxed as an S Corp? The tax benefits can be huge. If you pay taxes as an LLC, you must pay self-employment taxes on all income. As an S Corp, the business will pay you a reasonable salary and its payroll taxes – which count as business expenses; hello, tax deduction! — and distribute profit as dividends, which have a lower tax rate than regular income. Every situation is unique, and there are lots of details to consider, of course. That’s why it’s critical to include your CPA in your strategic planning.
Your CPA should be a strategic advisor. We can help you find one who is up to the task. We’ve spent more than 40 years perfecting a system for helping entrepreneurs and investors permanently reduce their taxes. If you’re ready to see what the TFW Advisors® system can do for you, give us a call!