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LLC Vs S Corporation Vs C Corporation
Home Business LLC vs S Corporation vs C Corporation Home Based Business LLC vs S Corporation vs C Corporation Nevada Las Vegas 89123

 Here are the benefits of filing a S Corporation, a C Corporation or an LLC

A corporation or LLC not only does it protect you from personal civil and financial liability but it's also the best way to reduce your tax liability.  In general, you can deduct health insurance premiums, new equipment, travel, and many other expenses. In addition, if you or your corporation has excessive income, you can split it between yourself and your corporation and save thousands in taxes.


We have a progressive income tax system and it is very expensive to have too much income.
For example, for individuals, the tax brackets are 15%, 27%, 30%, 35% and 38.6%.
A “C” corporation’s tax rate is ranging from 15% on the first $50,000 of net income, to 39%.
With an S corp, all of the corporation's income is counted as your own personal income pushing you in the higher brackets. With an S corp, the shareholders are required to pay income whether or not they take any money out of the corporation.s always, these ideas should be discussed with a tax adviser.

Splitting Income

However, owners of C corporations can split their purchases of business assets among several of their different businesses -- as opposed to owners of S corporations under Section 179 deduction, which is limited to just one amount.
In addition, a C corporation using the deduction for net rental losses is increased because a C corporation can use rental losses to offset all operating income. However, S corporation are subject to more restrictive rules.
Shifting income between taxable years
Here is how you save money with this method.
Individuals report their taxable income based on a calendar year: the January 1 to December 31 calendar year. S corporations are not allowed to shift income between years.  


  On the other hand, C corporations can end their fiscal year at the end of any month. Just remember that the first tax return can be less than a full 12 months, so there is no concern with making it a full year starting from the incorporation date.
Do this to save on taxes. Just about the year end, pay your C Corporation with some of your personal tax income. Us something like paying for leasing something from the corporation or advertising for you. The corporation can pay you back in the next month of the next year ( e.g., January. When it gets close to the end of the corporation's fiscal year, pay yourself with some of the C corporations net income. You can shift income in that fashion indefinitely. Just make sure that you pay the lowest tax possible (15%).

Employee Benefits Tax deductible Fringe benefits

Employer-paid medical insurance & expenses. Employee compensation, in the form of employer payments for health insurance premiums and other medical expenses, is deducted as a business expense by employers, but isn't included in employees' gross income.
Other employer-provided insurance benefits. Many employers cover part or all the cost of premiums or payments for: (a) employees' life insurance benefits; (b) accident and disability benefits; (c) death benefits; and (d) supplementary unemployment benefits. The amounts are deductible by the employers and are excluded as well from employees' gross incomes for tax purposes.
Exclusion of employee parking expenses and employer-provided transit passes. Employee parking expenses paid for by employers are excluded from the employees' income, up to $155 a month, indexed for inflation. (Parking at facilities owned by the employer isn't counted as a tax break.)


  Other fringe benefits.

Several other employee benefits are not counted in employees' income, although the employers' costs for these benefits are deductible business expenses. Such exclusions include, among other things, child care, meals and lodging, ministers' housing allowances and the rental value of parsonages.
How to avoid Double Taxation

The most serious concern of c-corporations is double taxation but this only happens when earnings are distributed to shareholders as dividends.
You can remedy this problem with deductible withdrawals of net profits. For example you can withdraw compensation for yourself as wages or consulting income, interest payments, lease payments, royalty payments, and sums paid to retirement accounts.

If you have a problem S Corporation, here is how to fix it: 

First, know that you can change from an S to a C corporation but afterwards you cannot change back to an S for 5 years. In addition, if you change from a C to an S, you cannot use a C corporation fiscal year and You will have to use the December 31 fiscal year. It is probably better to just file a completely new corporation but it can be expensive.

Note that all corporations are C corporations when filed and you need to have all shareholders sign and submit Form 2553 with the IRS to request the S status. You can do that right away or wait a few years – but note that if you have been using a fiscal year that does not end in December, you will have to change to a calendar year ending in December.

Also note that if your S election for some reason is revoked, you will probably not be allowed to use a fiscal year that does not end in December. In addition, note that some states have effective dates of the S election. Some States accept the IRS's S election regardless of the time you elect it but others require that you fill a state form to request S Status.


LLC Vs S Corporation Vs C Corporation

   Should I choose a C or S corporation?

With a "C" corporation, you cannot deduct losses from personal losses, or other ventures you get into, but with a "S" you can. However, you can deduct many losses on your personal income tax, so I would not worry much about it. 

  On the other hand, with a "C" you can enjoy tax free fringe benefits such as health insurance and travel. In addition, remember, with an "S" you are self employed, whereas, with a "C" you are an employee and owner of a corporation.

This weighs much more with banks and other types of creditors and clients.

Anyway, if you try to build a corporate name and credit, and enjoy fringe benefits, a "C" is better. On the other hand, if you want to offset losses from other ventures, an "S" is better.

Effective business tax planning should be a year-round effort. It's never too early to implement strategies to lessen tax liability for the year ahead.
Here are some ways a business owner may be able to improve his tax situation:
Keep track of business interest expense deductions. Does the business need to borrow to finance growth or expansion or to meet other business needs this year? If so, 100 percent of the trade or business interest expense incurred can be deducted. 

Deduct all business account fees. All account fees paid to a company's service provider for company retirement plans or other services can be deducted, as long as the costs are paid for separately by the business.
Deduct business equipment purchases. Businesses can expense, or deduct, the cost of new equipment purchased. The limit was increased to $25,000 in 2003, up from $24,000 in 2002.  The rules may be different for 2012 and 2012.

Of course, whether it's best to buy or lease new equipment depends on factors other than tax implications, including the expected life of the equipment.
Establish or contribute more to a company retirement plan. Contributing to a company-sponsored pension or profit-sharing plan can provide business tax deductions. The deduction amount can be significant — up to 25% percent of eligible participants' compensation, depending on the type of retirement plan, or perhaps even more for those with a defined benefit plan.

 Companies that encourage employees to share in retirement funding through a 401(k) plan or Savings Incentive Match Plan for Employees generally can deduct matching contributions the company makes. To reduce its tax bill this year, a company may consider increasing its matching contribution. If making contributions for 2003, the company will have to set up a pension or profit-sharing plan by the end of its fiscal year, but once a plan is in place, the company can make contributions as late as its tax-filing date plus extensions.

SIMPLE plans can be a cost-effective way to create business tax deductions, as well as attract and motivate employees. Depending on the positions held by employees and how they are compensated, in addition to 401(k) or SIMPLE retirement savings programs, there are other plans that would also allow a company to contribute up to a few thousand dollars annually and claim a tax deduction in the process.
A company owner should not forget to be a participant in the company's plan. Using tax-deferred retirement saving plans can help any person's personal assets grow faster.

Change the structure of the business. If business taxes are currently assessed using the owner's individual tax rate, as are unincorporated businesses such as S corporations, partnerships and sole proprietorships, the owner may be paying more than he needs to. Depending on the owner's income, his personal tax rate might be as high as 38.6 percent. Changing to a C corporation status could reduce taxes on business profits not taken as salary.

Invest in tax-wise ways. A business owner may be able to manage the business' investable assets in ways that minimize tax liability. Tax-exempt money market funds and other tax-advantaged investments, such as municipal bonds, may be attractive options for corporate cash reserves. If the business is in a lower tax bracket, however, it may benefit from the taxable returns on CDs, commercial paper, agency securities or taxable money market mutual funds.

Take advantage of the dividends-received deduction. C corporations are generally permitted to exclude from their taxable income 70 percent of the dividend income from certain other corporations whose stock they hold. The securities that pay the dividends must be held for at least 45 days.
Defer investment income and accelerate deductions. Defer investment income into 2004 and accelerate deductions into 2003. A sole owner, partnership or S corporation that has adopted a cash basis accounting system can shift cash from money market funds into short-term discount obligations, such as CDs, that mature next year.

A company can also delay sending year-end billing notices until the following year, prepay estimated taxes or consolidate business tax deductions into the current year. Conversely, if a company expects its business to be in a higher tax bracket the following year, or if it expects to be subject to the Alternative Minimum Tax in the current year, it may consider accelerating income in the current year and deferring deductions until the following year to lower next year's tax bill.

Meet tax due dates. Consider matching the maturity dates of investments with the due dates of tax payments, so the money is there when it is needed. There are a wide variety of short-term securities available, with maturities ranging from a few days to a few months.  As always, these ideas, should be discussed with your tax advisor or an attorney.



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