Essay on Legal And Financial Implications Of Saving Money On Taxes

761 Words Dec 9th, 2016 4 Pages
If you 're a business owner, especially a small business owner, every penny counts. The more money you have, the more you can invest, the more your company grows, and the more money you have to take risks. Naturally, you want to save as much as possible on your daily expenses and daily operations. You may also wonder why you 're paying so much in taxes. Saving money on taxes can be easier said than done, because the tax code is expensive. There are some common ways, however, that a lot of small business overpay on taxes.

Choosing the Wrong Business Entity Can Increase Your Tax Liability

The two main business structures, a limited liability company(LLC) and a corporation both have unique tax, legal and financial implications. The right way to structure one business may be wrong for another, because what is right for one, may not be right for another, so it is important to structure your business in the best way to limit personal liability.

For example, did you know that corporations, ("C Corporations) and their shareholders are subject to double taxes? According to the IRS, corporations are taxed when a profit is "earned, and then is taxed to the shareholders when distributed as dividends.”

On the other hand LLC owners can pass profits through to owners to be considered regular income. have the option to be treated as a disregarded entity (like an “S Corporation”) which means that the LLC’s profits can be passed through to its owners to be treated like regular income.…

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