A limited liability company or LLC is one of the easiest business structures to set up and maintain. As its name suggests, it can also protect your personal assets from business liability if a dispute or other issue arises.
Another reason many New York entrepreneurs choose the LLC structure is because of its tax advantages. Unlike most business structures, you have more control over company taxation with an LLC.
Freedom of choice
An LLC offers flexibility in deciding how to treat your business profits when you file your taxes.
You can designate it as self-employment income and include your earnings on your personal tax returns to avoid double taxation. Or you can treat it as S-corporation income and gain corporate tax benefits, but you will need to file a business tax return in addition to your personal return.
Pass-through business deductions
As a business owner, you want to take advantage of all the potential deductions you can claim on your income tax returns.
Under the Tax Cuts and Jobs Act, LLC owners may qualify for a business deduction as high as 20% out of pass-through income. While there are limits to what you can use the deduction for, it has the potential to help you avoid higher income and self-employment tax burdens.
These benefits sound simple to obtain, but avoiding tax hardships depends on many factors (your industry, income types, etc.). Instead of assuming you qualify for tax breaks because you operate an LLC, consider learning more about business taxation. It is one part of running a company that may benefit from legal knowledge and guidance.