Do you own your own business? You should! I know what youâ€™re thinking; I donâ€™t have anything to sell, make, service or produce. Iâ€™m here to tell you that it really doesnâ€™t matter. Starting an LLC (Limited Liability Corporation) is imperative for anyone who wants to pay less tax and keep more money.
A LLC is a flexible form of business enterprise that blends elements of partnership and corporate structures. If there is only one member, it is treated as a “disregarded entity” for tax purposes, and the owner reports the LLC’s income on his or her own tax return on Schedule C. (Wikipedia)
What does all that mean? That means if you own an LLC you can effectively lower your tax burden by writing off business expenses!
Example: You make $40,000 a year at your primary, 9-5 job. You start an LLC but donâ€™t actually make any money the first year, but you do spend money on the businessâ€™s behalf.
Possible business spending: stationary, home office space, office furniture, mileage, gas, business lunch/dinners, marketing materials, education materials (how to books), classes, tax preparation, business trips, anything you buy or use during the course of business and to conduct your business
Although you made $40,000 dollars, you spent $10,000 to run your business. You have now potentially lowered your tax burden by $10,000. This means instead of paying taxes on $40,000, you could potentially pay taxes on only $30,000! This can also result in a major refund! (Your accountant will know whatâ€™s deductable and whatâ€™s not)
With an LLC members are only required to pay taxes on their earnings once instead of paying both corporate and individual taxes.
This is how the wealthy shelter themselves from paying high taxes. On paper, many of the wealthiest people in the world effectively make NOTHING each year! This means they pay virtually nothing in taxes. They use their deductions to their advantage and so should you.
Start an LLC to sell stuff on Ebay, to babysit, tutor, mow lawns, do hair, write a blog, it doesnâ€™t matter, just start one! An LLC costs about $125 (filing fee) to start and can be set up online via your stateâ€™s government website. Â So what are you waiting for? Spending dollars make cents!