Hi,
I would appreciate any input into this scenario. I set up an LLC through my state website (Utah) and I was asked whether I was going to file quarterly ($16,000 or more per year) or yearly (less than $16,000 per year). What does this mean exactly? I am a beginning real estate investor looking to build up cash flow through discount properties. Can I amend the status with the state as well? In addition, what is the purpose of an LLC besides asset protection in my scenario? What would be the advantage of opening a business bank account and using that as opposed to my personal accounts?
Thank you so much in advance for your advice!
Utah is probably asking if you will be filing quarterly or annual state tax returns.
LLC’s are very flexible with regard to taxation, able to be taxed as sole proprietorships, partnership, C-corp or S-corp. Thus you can tailor your tax strategy to the type of business you are anticipating.
do NOT conduct LLC business from your personal bank account nor pay personal bills from the LLC account. This is a business, completely seperate from you personally. Run it like one. Have a business checking account. Submit expense reports for reimbursement for any expenses you pay personally. Likewise, if you want to take cash from the company, write yourself a check (salary, commission, call it whatever) and deposit it to your personal account to spend. If the business needs money, write a check as a loan, properly documented with a promissory note. “Comingling” will kill your asset protection in court.
Mr mcwagner. i think you are very knowledgable on the subject of llc. you said if the business needs money call it a loan. Why cant you just put the money in the llc checking account and call it investment capital to fund the business and then when you want to take money from the llc why cant you call it distribution of profits. Just wanted your opinion because this is how i plan on running my llc . Is this wrong???thanks for your help
Are there any personal income tax ramifications to consider when transferring money back and forth between personal accounts and the LLC? Does it matter how it’s described? (loans, salary, profit distribution, etc.)
As long as all of the LLC income passes through as persoanl income, is it all a wash tax-wise?
Forgive my ignorance. I’m just beginning to consider the advantages of an LLC. I’m very close to making my first investment purchase and trying to learn all that I can ahead of time.
no. just be sure that all transactions are documented (promissory note, expense report, etc).
neither distributions of profits (unless you tax the LLC as a C-corp) or loan payments are taxable events.
and note, you can tax the LLC as sole proprietor, partnership, c-corp or s-corp. not all of these are pass-thru entities for taxation, and each presents certain advantages and disadvantages from the tax perspective.