Kirsch Kohn Bridge CPAs + Advisors
  • About
    • Firm Overview
    • Our Team
    • International Affiliation
  • Services
    • Assurance and Accounting
    • Tax
    • Advisory Services
  • Industries
    • Construction
    • Manufacturing and Distribution
    • Not-For-Profits
    • Professional Services
    • Real Estate
    • Retail
    • Technology
  • Insights
  • Careers
  • Contact
  • Client Resources
  • Pay Online
  • Menu Menu
  • LinkedIn

Insights

Why an LLC might be the best choice of entity for your business

August 23rd, 2022/Tax

The business entity you choose can affect your taxes, your personal liability and other issues. A limited liability company (LLC) is somewhat of a hybrid entity in that it can be structured to resemble a corporation for owner liability purposes and a partnership for federal tax purposes. This duality may provide you with the best of both worlds.

Like the shareholders of a corporation, the owners of an LLC (called “members” rather than shareholders or partners) generally aren’t liable for business debts except to the extent of their investment. Thus, they can operate the business with the security of knowing that their personal assets are protected from the entity’s creditors. This protection is far greater than that afforded by partnerships. In a partnership, the general partners are personally liable for the debts of the business. Even limited partners, if they actively participate in managing the business, can have personal liability.

Check-the-box rules

LLC owners can elect under the check-the-box rules to have the entity treated as a partnership for federal tax purposes. This can provide a number of important benefits to them. For example, partnership earnings aren’t subject to an entity-level tax. Instead, they “flow through” to the owners, in proportion to the owners’ respective interests in profits, and are reported on the owners’ individual returns and are taxed only once. To the extent the income passed through to you is qualified business income, you’ll be eligible to take the Section 199A pass-through deduction, subject to various limitations.

In addition, since you’re actively managing the business, you can deduct on your individual tax return your ratable shares of any losses the business generates. This, in effect, allows you to shelter other income that you (and your spouse, if you’re married) may have.

An LLC that’s taxable as a partnership can provide special allocations of tax benefits to specific partners. This can be an important reason for using an LLC over an S corporation (a form of business that provides tax treatment that’s similar to a partnership). Another reason for using an LLC over an S corporation is that LLCs aren’t subject to the restrictions the federal tax code imposes on S corporations regarding the number of owners and the types of ownership interests that may be issued.

Explore the options

In summary, an LLC would give you corporate-like protection from creditors while providing you with the benefits of taxation as a partnership. Be aware that the LLC structure is allowed by state statute and states may use different regulations. Contact us to discuss in more detail how use of an LLC might benefit you and the other owners.

© 2022


For more helpful tax and accounting articles, or to sign up for our newsletter, please visit our KKB Insights page.  And if you have additional questions, please contact us. We are here to help!

TAGS: Tax

Share This
  • Share on Facebook
  • Share on Twitter
  • Share on WhatsApp
  • Share on Pinterest
  • Share on LinkedIn
  • Share on Tumblr
  • Share on Vk
  • Share on Reddit
  • Share by Mail

Sign Up For Insights

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

Categories

  • Accounting
  • Advisory
  • Assurance
  • Tax

Archives

  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021

Insights

Franchise Tax Board conforms to IRS filing extensions for California storm victims

January 16, 2023/0 Comments/in Tax/by KKB CPAs

On January 13, the Governor’s office announced that California will conform to the IRS filing extensions granted for California individual and business taxpayers impacted by recent storms. This means the Franchise Tax Board has extended filing and payment deadlines for many taxpayers in California until May 15, 2023. Continue Reading Franchise Tax Board conforms to IRS filing extensions for California storm victims

Read more
https://kkbcpa.com/wp-content/uploads/2023/01/28.jpg 334 500 KKB CPAs https://kkbcpa.com/wp-content/uploads/2021/12/KKB-Logo-w-text.png KKB CPAs2023-01-16 17:29:142023-01-16 17:29:15Franchise Tax Board conforms to IRS filing extensions for California storm victims

IRS grants filing and payment extensions to California storm victims

January 13, 2023/0 Comments/in Tax/by KKB CPAs

Individuals and businesses located in California may qualify for tax relief. California storm victims now have until May 15, 2023, to file various federal forms and make tax payments. Continue Reading IRS grants filing and payment extensions to California storm victims

Read more
https://kkbcpa.com/wp-content/uploads/2023/01/27a-e1673628641197.jpg 331 600 KKB CPAs https://kkbcpa.com/wp-content/uploads/2021/12/KKB-Logo-w-text.png KKB CPAs2023-01-13 11:35:432023-01-13 11:52:26IRS grants filing and payment extensions to California storm victims

Employers should be wary of ERC claims that are too good to be true

January 10, 2023/0 Comments/in Advisory/by KKB CPAs

Have you heard ads on TV telling businesses how they can claim a huge Employee Retention Credit? It might be possible for some employers but it also might be too good to be true. Continue Reading Employers should be wary of ERC claims that are too good to be true

Read more
https://kkbcpa.com/wp-content/uploads/2023/01/26.jpg 292 560 KKB CPAs https://kkbcpa.com/wp-content/uploads/2021/12/KKB-Logo-w-text.png KKB CPAs2023-01-10 14:59:282023-01-10 14:59:30Employers should be wary of ERC claims that are too good to be true

IRS grants filing and payment extensions to California storm victims

January 13, 2023/0 Comments/in Tax/by KKB CPAs
Read more
https://kkbcpa.com/wp-content/uploads/2023/01/27a-e1673628641197.jpg 331 600 KKB CPAs https://kkbcpa.com/wp-content/uploads/2021/12/KKB-Logo-w-text.png KKB CPAs2023-01-13 11:35:432023-01-13 11:52:26IRS grants filing and payment extensions to California storm victims

Employers should be wary of ERC claims that are too good to be true

January 10, 2023/0 Comments/in Advisory/by KKB CPAs
Read more
https://kkbcpa.com/wp-content/uploads/2023/01/26.jpg 292 560 KKB CPAs https://kkbcpa.com/wp-content/uploads/2021/12/KKB-Logo-w-text.png KKB CPAs2023-01-10 14:59:282023-01-10 14:59:30Employers should be wary of ERC claims that are too good to be true

SECURE 2.0 law may make you more secure in retirement

January 5, 2023/0 Comments/in Tax/by KKB CPAs
Read more
https://kkbcpa.com/wp-content/uploads/2023/01/25.jpg 292 560 KKB CPAs https://kkbcpa.com/wp-content/uploads/2021/12/KKB-Logo-w-text.png KKB CPAs2023-01-05 12:45:372023-01-05 12:45:39SECURE 2.0 law may make you more secure in retirement
View All

Sign up for insights

"*" indicates required fields

This field is for validation purposes and should be left unchanged.
KKB alternate logo

Kirsch Kohn & Bridge LLP

Phone: 818-907-6500
Fax: 818-783-0725
21800 Oxnard St., Suite 900
Woodland Hills, CA 91367
info@kkbcpa.com

Firm Overview
Our Team
International Affiliation
Contact
Careers

Sign up for our newsletter
Client Resources
Pay Online

© 2023 Kirsch Kohn & Bridge LLP. All rights reserved. Privacy Policy

The Inflation Reduction Act includes wide-ranging tax provisionsHome sweet home: Do you qualify for office deductions?
Scroll to top