Mark Glendon

What Are the Tax Benefits of an LLC?

A limited liability company (LLC) is a type of incorporation that can be used to separate a business owner's personal liability from their professional liability. In most cases, LLC status is sought out by small business owners who are ready to move up from sole proprietorship but whose businesses are not large enough to justify full incorporation.

An LLC is a registered business entity that operates apart from the owner's finances. This means that the business and the owner are treated separately in matters of financial or legal interest. While this provides several legal benefits, it can also provide tax benefits for the owner.

Below are just a few of the many tax advantages of registering your business as an LLC:

1. An LLC May Hold Assets

Because an LLC is treated as its own business entity separate from the personal assets of the business owner, an LLC can sometimes be used to hold assets. This means the LLC is the entity that owns an asset or investment.

If you're invested in real estate, for example, you may be able to use an LLC to hold your investments. Laws vary by state, so, for example, if you want to know how to use an LLC to hold my real estate in NYC, you're going to want to look into New York's state laws regarding LLCs. If you want to know how to use an LLC to hold my real estate in NYC, your best bet is going to be to contact an NYC real estate attorney.

2. Pass-Through Income

An LLC is viewed as a pass-through entity by the Internal Revenue Service. This means that business income can pass through the LLC to the owner, and instead of being reported as income for federal income tax purposes, the income can be taxed as personal income instead. This can avoid having to pay taxes twice, once at the federal income level and then again on the personal level.

By removing the federal income tax portion of the income deduction, members of an LLC only pay tax on the income on their personal income tax returns.

3. Expenses Can Be Deducted

Business expenses can also be written off when you use an LLC. This means that qualifying purchases made for the LLC may be able to be deducted from the total taxable income. This may lower the amount of taxable income, but it can also remove the ability of the owner of the LLC to use the standardized deduction which may be more advantageous.

Author Resource:-

Mark writes often about estate planning. His articles may include topics like real estate closing attorney and business succession laws to help the people in needs. You can find his thoughts at estate planning law blog.