Essay on LLCs and Taxes

This is the type of business entity that the owner should adopt because it is the most common and since this is the owners first time he should choose this type of entity in my opinion.

John will have to pay self-employment tax, which is the gross income that obtained in business in the amount of $300,000. He will actually have to pay "income" and "self-employment" tax on the "net" earnings from his business... not the entire $300K because presumably he has

The top 1 percent of the wealthiest people in the U.S. pay a total of over 40 percent of all federal income taxes, which is more than the entire bottom 95 percent of all tax payers. Government programs are funded through Social Insurance Taxes that are the fastest growing source of federal income though it’s actually counted separately in special trust funds by the Treasury. Both federal and state governments combine these taxes that are used to pay for social programs such as social security, Medicare, and unemployment services. This type of taxation is a regressive tax, since lower income people end up paying more from their income than those with a higher income. Another federal tax is the excise tax, better considered a luxury tax for non-necessities, which include things like liquor, cigarettes, gas, and highways. Taxes that are imposed on imported goods so that there’s less foreign competition on the domestic market are called customs duties.

Another factor to consider is the employment rate from state to state. The Medicaid program funds out of general tax revenues. In other words, the employee is helping to pay for the Medicaid program through their federal and state withholding tax. However, at times relying on employee tax may be unstable. When people are out of work and qualify for more

John has income derived from a business and as such the gross income will be taxable. (Code §1.61-3(a)) This total amount of taxable income will pass through to his personal taxes since he has an LLC, meaning he will be subject to self

John has income derived from a business and as such the gross income will be taxable (Code §1.61-3(a)) (Tax Almanac, 2005). This $300,000 taxable income will pass through to his personal taxes and is subject to self employment tax since he has an LLC. He

Business taxes can have a huge impact on the profitability of businesses and the amount of business investment. Taxation is a very important factor in the financial investment decision-making process because a lower tax burden allows the company to lower prices or generate higher revenue, which can then be paid out in wages, salaries and/or dividends. Business taxes include, Federal Income Tax; a tax levied by a national government on annual income, Payroll Tax; a tax an employer withholds and/or pays on behalf of their employees based on the wage or salary of the employee, Unemployment Tax; a federal tax that is allocated to unemployment agencies to fund unemployment assistance for laid-off workers, and Sales Tax; a tax imposed by the government at the point of sale on retail goods and services. Sales tax is based on a percentage of the selling prices of the goods and services. Consumers pay sales taxes, but effectively, business pay them since the tax increases consumer’s costs and causes them to buy less.

According to a Washington Post analysis of a report from the Congressional Budget Office, approximately $741 billion of the funding comes from Medicare cuts over ten years, with $415 billion of that coming from cuts to payment rates. From that same analysis, another significant source of funding is new and increased revenue from taxes. Over ten years, some $161 billion of these taxes come in the form of penalties paid by individuals and employers for not meeting the terms of the insurance mandate, while another $318 billion comes as a result of increased taxes on unearned income for individuals earning more than $200,000 a year. (Kliff, 2012)

In addition, the other tax we are paying is the Medicare. Medicate is a health insurance program provided for people who are 65 years old and older. Medicare was once lumped with the Social Security rates; combining the two gives a higher rate than separating it even thought when it is added it is still the same rate. Medicare benefits actually go hand and hand with Social Security

There are times in many entrepreneurs’ lives when the opportunity arises to take their business to the next level, but it’s critical to understand what type of entity would best fit one’s needs before taking that step. The owner of Acme Fireworks started up his company two years from his own home and since its start up, the company has grown efficiently with the employment of more staff and the increase in production to keep business going. The owner is deciding to change the business from a sole proprietorship to a different type of business entity that would suit his company because he has recently received several large demands from various established retailers inquiring about mass producing and selling his fireworks in their stores. The

Rationale. The advent of the limited liability company in the 1990’s came about primarily to promote small business start-ups by providing substantial asset protection, simpler rules, and favorable state and local tax treatments (Millon, 2007; Riles & Whitlock, 2003: Vandervoort, 2004). LLCs are also typically easier and less expensive to form and manage than a corporation and quickly became the entity of choice (Hopson & Hopson, 2014).

Payroll taxes are the federal tax and the state tax contributed by the employer and employee to finance health care, pension, benefits for disability and compensation for the injured employee. Pay roll tax falls under two categories: one deduction from the employee’s wage and another is based on employee’s wage paid by the employer. In the first kind of payroll tax, employer reserve certain fraction of their employee’s earning’s. It is also known as pay as you go tax (PAYG) or pay as you earn tax (PAYE). One the other hand, in the second kind the employer’s pays the tax from his/her own fund and is directly related to employing a worker. The sum paid by the employer normally covers the employer’s finance of the social security system, Medicare, and other insurance programs. The US government charges two distinct payroll taxes in labor wage. The first tax is a 12.4 percent to fund the social security in which the first dollar an individual earns in income up to a cap of $117,000 in 2014. Each year the cap is adjusted to the change in the wage. Both the employer and employees share the equal burden in the tax i.e. 50 percent from each side out of total 12.4 percent. The second tax funds the Medicare which is 2.9 percent payroll tax and is also levied from the first dollar of income but has no cap. This tax is also divided equally between employers and

Advantages Disadvantages (1) Additional Skills to strengthen the business (1) Share profits (2) More capital to help business (2) Loss of control (3) Debts are shared equally (3) Unlimited liability There are two types of companies,

The Federal Government relies predominately on the individual income tax, and federal income tax makes up more than 50 percent of the federal government’s revenue. Income taxes are paid by all those who earn income (Mikesell, 2011). It is essentially a bill from the federal and state governments for individual earnings through salaries and investment profits. Income tax is considered a progressive tax because the individual's financial obligation rises with the level of reportable income (Mikesell, 2011). Although income tax is the one of the most effective ways of raising revenue for the government, it is also one of the most controversial.

Tax planning in general, and tax planning for an acquisition or sale of a business in particular is a process of selecting among various alternative structures in order to achieve the best outcome for both tax and non-tax objectives. Therefore, without specific objectives the desired results will not be achieved by either party.