Will I Pay Less Taxes If I Run My Business Through an LLC?

Posted by chirag on August 31st, 2023

Let’s say you decide to launch a cleaning business, and it is an exciting and rewarding venture. But one of the vital considerations for you as a business owner is the tax implications. If you are considering establishing a legal structure for your business, you might want to opt for LLC because of its potential advantages. Furthermore, it is easy to file it by using our corporate processing service.

Corporate Processing Service for LLC

In the past, filling out forms to apply as an LLC required a lot of documents and more hassle. It was also time-consuming. But with the existence of this service, everything gets a lot easier. So you can focus on your cleaning business and run it through an LLC.

Paying Fewer Taxes

An LLC is a legal entity. It combines corporation and partnership or sole proprietorship elements. It provides personal liability protection for you and the members of your company and it offers certain tax benefits. But it is essential to note that tax laws can be complex and it can vary from state to state. If you want personalized advice based on your specific circumstances and location, then make sure to give us a call.

Tax Advantage

One potential tax advantage of running a cleaning business through an LLC is the ability to enjoy pass-through taxation. By default, an LLC is a disregarded entity for tax purposes. It means that your business’s profits and losses pass through to the member’s tax return. It enables your business income to be taxed at the individual level. This results in lower overall tax rates compared to corporate tax rates.

Double Taxation in C-Corporation

A traditional corporation is subject to double taxation. The corporation pays taxes on its profits. Then the shareholders are tied to the dividends they receive. Double taxation can often result in a higher overall tax burden for you and your business.

Self-Employment

LLC members, however, are subject to self-employment taxes. They are taxes that consist of both the employer and employee portions of Social Security and Medicare taxes. They are typically around 15.3% of net self-employment. The reason for this is that the IRS considers LLC members to be self-employed individuals.

Is It a Drawback?

It may look like a drawback. However, it is worth noting that even sole proprietors are subject to self-employment taxes. Thus, this aspect is not exclusive to running a cleaning business through an LLC. This type of business structure also offers the flexibility to choose how the business owners want to be taxed. By default, a single-member LLC is taxed as a sole proprietorship. But if you choose multi-member LLCs, they are taxed as partnerships. You can also choose to be taxed as an S-corporation or a C-corporation. It depends on the specific circumstances and goals.

Deduct Business Expenses

Another advantage of running your cleaning business through an LLC is that you can deduce business expenses. LLCs can deduct ordinary and necessary expenses related to the operation of your business. For instance, you can deduce cleaning supplies, marketing costs, insurance premiums, and office space rent as business expenses.

If you wish to know more about the advantages of LLC and how our corporate processing service can help, please give us a call.