What are the tax implications of different business structures?

What are the tax implications of different business structures?

The tax implications vary significantly between structures like sole proprietorships, partnerships, LLCs, and corporations. What specific structure are you interested in?

I'm considering forming an LLC. How does that affect my taxes?

An LLC offers flexibility in taxation. By default, it's treated as a pass-through entity, meaning profits are taxed on your personal return. However, you can also elect to be taxed as a corporation.

What about a corporation? Are there different tax rates?

Yes, corporations are taxed at the corporate tax rate, which can be different from personal income tax rates. Additionally, if profits are distributed as dividends, they may be taxed again at the individual level.

Are there any tax benefits to choosing an S Corporation?

Yes, S Corporations allow profits to pass through to shareholders, avoiding double taxation. However, there are eligibility requirements and limits on the number of shareholders.