Advantages of an LLC | What is an LLC?

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Are you wondering what the advantages of an LLC are? Wondering what is an LLC, an S-Corp, Partnership or Sole Proprietorship? Check out the first in our series of small business advice vlogs and learn why you might consider the advantages of an LLC as your choice for choosing the entity of your company structure.

Transcript:
Welcome to another edition of Tuesday's Tidbits where we make tax and accounting simple. I'm Charles D Shapero, CPA with Widget Bookkeeping and Tax. And today we're gonna talk about the LLC. What is the LLC? Would you believe when it was first invented by the states, the IRS didn't know what to do with it. The LLC...is it a corporation, it has limited liability, is it a partnership? We don't know. Instead of writing a whole new code section segment about the LLC the IRS threw up their hands, and says "you know what" We're gonna allow the LLC to be whatever it wants to be. So by default, every LLC that has more than one member, husband/wife or multiple partners is considered a partnership per federal tax law, it will file a partnership tax return, if you have a single member that owns the LLC, you can't really be partners with yourself, so that's where the beauty in the LLC lies, the single member LLC is completely ignored for federal tax purposes, so you have an entity that you can have a bank account with, that you can have limited liability protection from anyone who is trying to sue you but you don't have to file a separate tax return so it saves you on accounting fees. The LLC's activity would go directly on your personal return, depending on what activity schedule C, schedule E but it's a great way to get your liability protection and not have to pay for an extra tax return. But it goes even further the LLC can say: we understand that we're a default partnership, but we don't want we want to be a sub-chapter S-corporation, the LLC can file form 2553 with the IRS and say IRS no, we do not want to be a partnership we want to be an S-Corp for tax purposes so please tax us like an S-Corp, the LLC can say and also fill out form 8832 the entity classification selection and say IRS we don't want to be a partnership we want to be a C-Corp now I don't recommend C-Corporations a lot but there are some circumstances where you might to be a C-Corporation. The LLC is a very flexible entity, its a great entity to get started because it can be ignored in the beginning and then elect S later when profits start to materialize And that my friends concludes today's tidbit See you next Tuesday! Widget Bookkeeping and Tax: Know More, Keep More.