If I put my properties in the name of an LLC how do I personally get to tap into the profits that my properties bring in every month.
Thnaks in advance
If I put my properties in the name of an LLC how do I personally get to tap into the profits that my properties bring in every month.
Thnaks in advance
uh…write a check?
seriously, distribution of profits has no tax effect. Just write a check and call it “distribution of profits.”
How do you pay taxes on what you distributed to yourself?
Signed clueless
sorry for the interuption it was a good question
you pay taxes on income when it is earned.
you will pay taxes whether or not you make a distribution.
distribution of cash from profits is a different, and not taxable, event.
So to clarify the LLC pays taxes on profit and distribution of cash from profit is not taxed on me personally on my incom tax? I am trying to get information before setting up an LLC. I am mostly interested in rehab .
MCWagner is correct. If the company earns $100k in net income, that income is reported on your return from a Form K-1 (very much like a big W-2) whether or not you distribute. Writing a check to yourself from an LLC that is ignored by the IRS, treated as a partnership or treated as an SW-Corporation is almost always a non-taxable event. In the case of the latter two permutations (partnership or S-corp), the aggregate distributions are reported on Form 1065 or 1120S, respectively.
John Hyre
Ok lets say I have a LLC taxed as a S-Corp. Throughout the year I take nothing out of the LLC except expences. Then at the end of the year the LLC has made a net profit of 40k. The LLC would then pay taxes on that 40k and inthe same year give a distribution of profit to me for 10k.
2)If so is there an advantage to doing this compared to getting a salary? (Not knowing whether the LLC will always have the money in the begining to cover said expences incurred w/ a salary?
Sorry it was long winded just trying to make sure i don’t screw myself and not pay attn. to running the inner business while trying to focus on REI.
Thanks
Phil
the LLC will send you a K-1 with your share of the LLC profits/losses to report on your tax return.
paying yourself a salary will require withholding, quarterly tax returns, SUTA, FUTA, W-2, W-3 the whole deal.
paying yourself a distribution from profits requires writing a check.
from a hassle perspective, distribution is the way to go. payroll will also cost you more in taxes for FUTA/SUTA that you can avoid otherwise.
So, in your example, taking the distribution is probably best.
Now, if you’re trying to take a reasonable salary to avoid excess SE on non-passive LLC income, that changes the math.
Thanks mark for the information.
Your help has been GREATLY APPRICIATED!