Electing Corporate Taxation

Any LLC may elect to be taxed by the IRS as a corporation. With pass-through taxation, LLC owners are required to pay taxes on the entire income that the LLC has allocated to them. Even if an LLC leaves money in the bank to support next year's business operations, owners still have to pay taxes on all reported LLC profits as if the profits had been distributed as cash to the owners.

In contrast, general, C corporations use their own cash on hand to pay taxes on the corporation's profits. A C corporation's owners do not have to pay individual taxes on profits unless the corporation pays a cash dividend to the owners.

Another potential tax advantage to being treated as a corporation is that with corporate taxation, the first $75,000 in income is taxed at corporate tax rates that are generally lower than the individual tax rates assessed on individuals who own all or part of an LLC.

If you are not sure how you want your LLC to be taxed you can still form your LLC now and decide later how you want your LLC to be taxed.

10 Tax Tips

The following small business "Tax Tips" describe ten ways you, as small business owner, can implement strategies designed to minimize your business' income tax liability, and "Make Your (business) Life Tax Deductible":

1. Your Self
   - Create tax-deductible fringe benefits, such as health care, insurance and transportation
2. Your Strategic Issues
   - Use certain current year tax deductions to reduce prior and future years' taxable income
3. Your Home
   - Write-off a portion of your home, plus 100% of your other business deductions
4. Your Retirement
   - Invest dollars pre-tax and let them grow tax deferred…invest dollars after-tax and let them grow tax-free forever
5. Your Form of Organization
   - Select the proper form of organization to minimize your business and personal income tax liability, as well as sheltering you (as the owner of the business) from personal liability exposure
6. Your Car
   - Deduct the entire cost of purchasing, operating and maintaining your car - that is applicable to business usage
7. Your Equipment
   - Create a special equipment deduction of up to $105,000 every year
8. Your Family
   - Pay your children tax-free dollars that your business can deduct
9. Your Travel
   - Deduct 100% of all business travel, including round-trip airfare – even when your trip is not all business
10. Your Entertainment
    - Deduct 50% of your meals, concerts, season tickets to sporting events and other entertainment costs that are either directly related to, or associated with, a business purpose

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