Home     Forum     401k     401k Rollovers
    Register   Login   Members   Search   FAQs     Recent Posts    




LLC taxes what constitutes profits

Reply to topic
Money Talk > Taxes

Author Thread
seanrsolutions
First Time Poster


Cash: $ 0.25

Posts: 1
Joined: 25 Oct 2013
Location: San Antonio
LLC taxes what constitutes profits  Reply with quote  

I've been researching this for a few days and decided to find a forum to post a question. I'm going to be starting an LLC within a few months but I'm am doing a lot of research and will have hundreds of questions (thank god this forum exists). Anyway to the point...

What constitutes profits for the IRS to tax. If owning an LLC, is every dollar made a profit? Am I taxed on money that I spend on operating costs? What about money that I reinvest into my company to expand? I was under the understanding that Corporations are taxed by end of year profits not including what was spend on expanding and operating costs. Also, any resources that you can point me to will be helpful as well. Thank you.
Post Fri Oct 25, 2013 3:14 pm
 View user's profile Send private message
littleroc02us
Moderator


Cash: $ 381.25

Posts: 1876
Joined: 09 Feb 2009

 Reply with quote  

I started my own business this year and made a partnership LLC. It's a handyman business and both my wife and I are members of the LLC. As far as I can understand you are taxed on your profits, which means after expenses and putting money back into the business, you fill our schedule C and basically you will be taxed at your income bracket. So we are planning on saving 25% of our profits for taxes at the end of the year. Normally your suppose to fill out quartely estimates to the IRS and pay each quarter on your profits. But because I started my business in May I'm just going to do it at the end of the year and hire a tax accountant this year.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Fri Oct 25, 2013 5:50 pm
 View user's profile Send private message
coaster
Senior Advisor


Cash: $ 1626.30

Posts: 7990
Joined: 11 Oct 2005
Location: Wisconsin
 Reply with quote  

I think the retained earnings will be taxable until they're reinvested as expenses for something, which may or may not be in the same tax year, so if not, you might have to pay tax on them (but eventually you'll get the expense deduction, anyway). You might want to consult a tax expert. It's been 15 years since I was self-employed, and I never had any profits anyway. Laughing

~Tim~
Post Sat Oct 26, 2013 5:18 am
 View user's profile Send private message
clydewolf
Senior Member


Cash: $ 50.25

Posts: 248
Joined: 27 May 2012

Re: LLC taxes what constitutes profits  Reply with quote  

quote:
Originally posted by seanrsolutions
I've been researching this for a few days and decided to find a forum to post a question. I'm going to be starting an LLC within a few months but I'm am doing a lot of research and will have hundreds of questions (thank god this forum exists). Anyway to the point...

What constitutes profits for the IRS to tax. If owning an LLC, is every dollar made a profit? Am I taxed on money that I spend on operating costs? What about money that I reinvest into my company to expand? I was under the understanding that Corporations are taxed by end of year profits not including what was spend on expanding and operating costs. Also, any resources that you can point me to will be helpful as well. Thank you.


As was stated earlier, Income minus expenses = profit.

You know how much income you have received, and you know what your expenses are, so you know your profit.

First take a look at some IRS Pubs, they are free.
- IRS Pub 334, Tax Guide for Small Business: http://www.irs.gov/pub/irs-pdf/p334.pdf
- IRS Pub 535, Business Expenses: Bhttp://www.irs.gov/pub/irs-pdf/p535.pdf
- Schedule C is where you calculate your profit: http://www.irs.gov/pub/irs-pdf/f1040sc.pdf
- Instructions for Schedule C: http://www.irs.gov/pub/irs-pdf/i1040sc.pdf

At the end of the Schedule C instructions you can determine your activity code.

Near the beginning of each of the Pubs you will see a list of other pubs that may be worth viewing.

Another important Schedule SE. You will be paying both the employer and the employee share of your SS and Medicare tax. That amount is 15.3%. But you do get to deduct the employer share on your form 1040 as an adjustment to your gross income.
- Schedule SE: http://www.irs.gov/pub/irs-pdf/f1040sse.pdf
- Schedule SE Instructions: http://www.irs.gov/pub/irs-pdf/i1040sse.pdf

Depreciation of your tools was mentioned earlier, and that is a subject you will want to consider. That is a bit more complex and I do not want to get into that in a forum.

By now you may begin to understand why a tax pro is often recommended for the self employed.
Post Sat Oct 26, 2013 7:34 pm
 View user's profile Send private message
prioritytaxgroup
Contributing Member


Cash: $ 5.05

Posts: 25
Joined: 20 Jun 2014
Location: usa
 Reply with quote  

LLC members, please be sure to check with your state regarding employment taxes. For example, in Texas, members/managers are employees and therefore are expected to pay taxes on their wages. Wages is defined as remuneration for services rendered. Texas state law does not allow a member/manager to draw "dividends and distributions" in lieu of wages, and therefore must pay taxes on the monies received as payment for any services rendered.
Post Thu Sep 04, 2014 6:24 am
 View user's profile Send private message Visit poster's website

Reply to topic
Forum Jump:
Jump to:  
  Display posts from previous:      





Money Talk © 2003-2016