LLC and Business Structure

Eva Rosenberg — Wed, 11 Nov 2009 06:17:00 -0800

Today TaxMama hears from Norm in California with a common question. “What is the best tax set up for in home consulting business. Is it LLC or? I have seen and heard so many different comments.”

Dear Norm,

There’s a reason you’ve heard so many different comments. There is no BEST structure.

The structure of your business depends on your short-term needs, your long-term goals and your exit strategy. That’s why, even though I outline the pros and cons of each business structure in Chapter 3 of Small Business Taxes Made Easy, I also advise you to consult with your tax professional.
http://www.taxmama.com/AskTaxMama/book/

I could spend about two hours outlining all the considerations you need to take into account in order to make the right decision. But there’s just not enough room here. Read Chapter 3.

One thing I will tell you, though. As long as you live and work in California, the last thing you want is an LLC.

In addition to the annual minimum tax of $800, there is a gross receipts fee of $900 and up. That means, even if your net profit is $2, or even if it’s a loss,...if your gross revenue started out at $250,000 or above, you pay an extra tax of at least $900. http://www.ftb.ca.gov/forms/02_forms/02_3556.pdf

So forget the LLC in California. They may be the perfect choice in some other state.

And remember, you can find answers to all kinds of questions about business structures and other tax issues, free. Where? Where else? At TaxMama.com.

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FTB FAQs :: All about California LLCs, including the Gross Receipts Fee chart

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LLC and Business Structure (Comment #1)

Tom Echols — Wed, 11 Nov 2009 13:40:06 -0800

My understanding is this fee applies to disregarded entities and partnerships. LLC's taxed as corporations are taxed in the usual manner?

TaxMamas TaxQuips: LLC and Business Structure

LLC and Business Structure

LLC and Business Structure (Comment #1)