There’s a lot of buzz going on about LLCs and S-corps, and I just want to clarify some myths and misconceptions about the two. Many of you out there who have either already launched your business or are looking to launch your business know that the first thing you hear is you need to get an LLC.
Usually following that, if you have a good tax professional, you will then maybe start to entertain the thoughts of an S-Corp because your tax professional may bring that up to you. Or, if you’re like most of us, and just on social media and seeing all the buzz out there, you may hear another person talk about S-Corps.
So basically what an LLC is, is it limits your liability, – if someone sues your company – to just your business assets. That’s in plain and simple terms, layman’s terms. That’s what an LLC is, it protects you from being sued personally, for business things that happen.
Now, what an S Corp is. It’s actually not a business entity. An LLC is a business entity like “Incorporated” or for a corporation you’ll hear LLC – if you are an attorney, that’s sometimes what you will be. But an S-corp is actually not a business entity. An S-corp is actually just the means by which you file your taxes and how you categorize your business type when you file your taxes. Because you may not know, because you’re not a client of mine, that an LLC is not recognized by the IRS.
You cannot file as a separate business, just as an LLC, because it’s not recognized by the IRS. What is recognized by the IRS though is an S-Corp. So what an S-corp is, it’s completely separating all of your business expenses and assets and liabilities, from you personally on your taxes.
So usually, if you are an LLC and you’re not filing your taxes as an S Corp, what you are doing is filing your taxes on a Schedule C with your 1040. And that’s okay up to a certain dollar threshold, but then you are basically causing yourself to be double taxed. If you’re continuing to do that there is a threshold on filing a schedule C where you should start to consider filing yourself as an S-Corp.
Don’t have a good tax professional or a business accounting expert, like Assemblage LLC, handling your business and operational things. You may not know that. And you may be setting yourself a double taxation. So if you want to learn more information about that, feel free to go to our website. Either schedule a pick-my-brain session, which is a 45-minute session with me or.
You can schedule a full-on business consultation, which we’ll cover at 90 minutes of your time with us. And we will sit down and go over everything about your business, from the expenses that you have, if you’re at the startup stages, what you need to do and where you need to spend, and how you need to scale your business and cover all of that in the 90-minute session, um, for that business one-on-one consultation.
As always follow us here for great content. And we so appreciate you. We appreciate you trusting us to serve you each and every day.