Tax Reduction Podcast
Introducing your host, Boris Musheyev, CPA. In this podcast Boris debunks the tax code by teaching you simple and effective tax strategies, so you can keep the most of what you make. His mission is to help you cut taxes and build wealth using the power of proactive tax strategies. Every episode you will gain a better understanding of how the tax code is designed to be in favor of money-making entrepreneurs like yourself.
🆓 Download FREE PDF: 7 Write-Offs Every S-Corporation Business Owner MUST Know: https://bit.ly/podcast7writeoffs
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Tax Reduction Podcast
Episode 26. Best LLC Tax Strategy
Are you a business owner navigating the complexities of LLC taxes and wondering how to maximize your tax benefits this year? In my latest podcast, I dive deep into the world of Limited Liability Companies (LLCs) and unlock the secrets to leveraging your LLC for incredible tax advantages.
As an entrepreneur, choosing the right entity structure for your business is crucial, and an LLC offers unique opportunities for tax savings. But how do you make the most of these opportunities? That's exactly what we'll explore together.
I've put together this FREE resource for you:
7 Write-Offs Every S-Corporation Business Owner MUST Know
🆓 Download FREE PDF here: https://7taxwriteoffs.com/
Ready to start saving money on your taxes?
☎️ Schedule your FREE Tax Advisory Session: https://taxplanningcall.com/
🤩 If you are looking for easy-to-use payroll software, I personally use and recommend to my clients Gusto Payroll Software - https://gusto.com/r/boris466
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*Disclaimer This material & presentation content is for informational and educational purposes only. This material and presentation content is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, ...
Best LLC tax strategy in 2024 that your accountant, your tax advisor or your tax planner is not telling you about. We're going to talk about how you can use LLC as a different entity for tax purposes. Should you, or could you, use it as a holding company, or should you be adding your spouse as a partner to minimize the risk of an audit Ready? Let's get started.
Speaker 2:Welcome to the Tax Reduction Podcast for Money-Making Entrepreneurs with Boris Mushaev. Boris has helped entrepreneurs across the United States collectively save millions of dollars in taxes with the power of tax planning and advisory. The only way you, the business owner, can save money on taxes is by using proactive tax strategies, and this podcast is all about saving you money on taxes. Boris will share with you in-depth and easy to understand tax reduction strategies that you can implement in your business within 30 days or less. Let's jump into today's episode.
Speaker 1:So we're going to talk about an LLC best LLC tax strategies in 2024. I'd like to start off with entity election. So if you have an LLC, which is a limited liability company, by default you are considered what IRS likes to call a disregarded entity. That means for tax purposes not legal, but for tax purposes it considers you as a sole proprietorship. And when you start an LLC and you start having multiple millions of dollars in your revenue or gross revenue or profits, you start paying a lot of taxes on it as a single member LLC, because you pay extra 15.3% self-employment income tax. Now, to help you lower that tax burden, irs came out with something that's called an S-corporation. It's a small business, s-corporation Meaning to say you can take any legal entity, such as an LLC or even a C-Corporation, and elect to be an S-Corporation. Now, you're not by default as an S-Corporation. You're not by default. A lot of people think, yeah, I'm an LLC, I think I'm an S-Corp. No, you have to make that election. Once you become an S-Corporation, you're going to start paying yourself a salary which will help you reduce your payroll taxes on the profit. So LLC is amazing because it has flexibility, whether you have two partners, three partners, or just yourself, or you and your spouse. You can make a decision to elect as an S-Corporation later on, as you start making more revenue or you start making more profit. Now what happens is that you have to make an election and file Form 2553. This could be filed by your accountant. You have to do it within 75 days of the beginning of the year or from when you incorporated. But even if you're late, you can do a late S-election. Hopefully you are working with a tax advisor who walks you through these steps and letting you know once you made an election, you want to put yourself on a salary right away and pay w-2 to yourself as an llc owner. Now, remember we also want to talk about when you have llc as a holding company or adding a spouse. We're going to get there, but right now I'm focusing on the fact if your llc is your main operating business.
Speaker 1:Once you've got salary, the first and foremost you want to do what do you want to do? If you pay health insurance as an owner of your own business, you want to incorporate it into a salary. Why? Because it'll save you not only on an asset deduction taxes on an asset deduction, but also additional savings on payroll taxes. But llc can be taxes and s corporation. That is the takeaway. Okay, llc can be taxes and s corporation. What we need to do right now is make an election, pay the salary and do health insurance now. This is going to save you a lot of money on taxes, especially if you're a profitable business owner. We worked with a business owner that was an LLC, didn't know he's not an S corporation, was paying himself a salary. I was happy he was doing that. We quickly fixed that, made sure the salary is reasonable, added health insurance and made a selection. He was compliant with IRS and he was on his way to save tons of money on taxes. Now let's talk about LLC being a holding company, and we'll do it right after this.
Speaker 2:Break taxes Now let's talk about LLC being a holding company, and we'll do it right after this break. If you have a tax preparer and you do not have a tax advisor, the only way you can save money on taxes is by using proactive tax planning strategies that only a tax advisor can give you. Boris put together a free PDF for you, the business owner Seven tax write-offs every S-corporation business owner must know. In this PDF you can find seven tax strategies that you can start using in your business to instantly start saving money on taxes. Click on the link in the description below for a free download.
Speaker 1:Okay, awesome, welcome back. Let's talk about LLC as a holding company. Now, in many instances, what happens is that a lot of business owners, as they start having profits in the business, they start investing. Right, they, they invest in another business, or they invest in real estate rental real estates, flips, or it could be commercial properties and and they start questioning hey, should I be forming a holding company? How should I structure that? So the best practice, first of all, is when you have an LLC right, I'm gonna write over here a real estate LLC.
Speaker 1:Okay. So when you buy any rental real estate property, we strongly recommend to our clients is to put each property into its own LLC. Okay, you're protecting, it's a limited liability company. Let's say you live in florida, but you bought a property I don't know in georgia, so you might want to open that llc in the state of georgia, okay. Now you say, okay, boris, I've got an llc in the state of georgia, but now I want to have a holding company. I've got a llc in the state of georgia instead of florida, instead of texas, and I want to have a holding company.
Speaker 1:You can certainly do so. You can open up a holding company either in one of the most favorable states when it comes to opening up holding companies. This could be Nevada, wyoming or Delaware, you know, definitely, speak to your attorney about this. Okay, definitely, definitely speak to your attorney about this for legal protection. But you can open up a holding company one of these states. Then this holding company is, in fact, is going to own each individual llc in which the properties are located.
Speaker 1:Now, again, we're assuming that you already have a main business llc as an s corporation and you converted that to an s corporation. You're on your way to save money on taxes. Now you start investing more and you start putting each real estate or you could own other businesses right. You could own a share in another business, you could be a partner in another business where you're receiving residual income or you're a passive partner, so this could also be an llc, okay, and then you can have a holding company in one of these states. Speak to your attorney that could could own these LLCs.
Speaker 1:That is another strategy that LLC can be used for. Remember, llc is flexibility. That's what I like to say. It's so flexible. It could be used for your main operating business, it could be used for your real estate holdings or it could be used as your holding company. Now that you've got your main business LLC structured as an S corporation, you've got your holding company and you've got real estate let's talk about. Should you be adding your spouse as a partner to your LLC to minimize the risk of an audit? And we'll do it right after this break.
Speaker 2:If all your accountant does is taxes, you may be overpaying in taxes by thousands of dollars every year. Every week, Boris releases a tax strategy on his podcast so that you, the business owner, can pay less in taxes every single year. Be sure to subscribe to our podcast to be notified when a new tax strategy is released. If you're ready to work with a tax advisor on your tax strategy and planning, be sure to schedule your call by heading over to wwwtaxplanningcallcom. Again, that's wwwtaxplanningcallcom. Again, that's wwwtaxplanningcallcom.
Speaker 1:Let's talk about adding your spouse. Now you're like, boris, what do you mean? Adding my spouse To my S-corporation, to my holding company, or what? So a lot of times what happens is that business owners that I work with that are very profitable and we, thank God, help them save a lot of money on taxes. Okay, they start another business. Now that when they start another business they ask him, boris, should it be another S corporation? And the answer is really always depends. In some cases it cannot be an S corporation for whatever other reasons.
Speaker 1:Right, not going to get into details, but it needs to stay as an LLC and it's a. It's an operating business that the client is involved, the user, business owner could be involved in. It generates revenue, it generates expense, it has expenses, generates nice profit. Now, if you file, remember what I said LLC is a disregarded entity. For IRS purposes. It is treated as a sole proprietorship, as a schedule C. So that means you have to edit on your Schedule C. Schedule C's in America have the highest audit rate, I believe, if not, if I'm not mistaken, the last census that was taken, uh, the last report, excuse me, uh, that was, uh that came out. I believe it was about eight or nine percent audit rate for Schedule C's. So when you put your business on a Schedule C, your LLC is a sole proprietor. Irs says whoa $1.2 million in gross revenue, $700,000 in expenses, and we see no balance sheet. Because there is no balance sheet with Schedule C, bam, that return has a higher probability of getting picked up for an audit.
Speaker 1:What we do with our clients, we're like hey, how about we add your spouse as a partner? Now some clients are very comfortable and say, you know what my spouse can be 50 percent. Or some clients like, oh no, I don't, I don't want my spouse anywhere near that. So we just give a 0.01 percent or one percent, whatever your financial situation is with your spouse. But why do we want to do that? Is because we're triggering what's called a partnership tax tax return, right form 1065. That means we're now not going to be filing a Schedule C, but we're going to file a partnership return. And guess which has the lowest audit rate? Partnership tax returns. Okay, so they have the lowest audit rates. And bam, we just decrease the audit rate from like 8% to like almost nothing. Right, so now we continue reporting that same income.
Speaker 1:Now I'm not trying to over here to say, hey, avoid IRS. What we're trying to do is minimize the risk of audit. Now, if you do get ordered, you should not be afraid of the IRS, especially if you've done everything diligently and correctly and you have documentation for all of your expenses and your income. It's just that we want to avoid a headache of dealing with the IRS and the audits just because we didn't know this little thing that your tax advisor could have told you. Now you're like Boris, how can I add my spouse you might want to call your attorney your corporate attorney, whoever put together your corporate paperwork and add your spouse to your operating agreement. Transfer the ownership. There will be no taxes on the transfer of ownership to your spouse, so you're totally okay there.
Speaker 1:Hope this was helpful. Ladies and gentlemen, if you're not working with a tax advisor yet, please get yourself a tax advisor, especially if you're opening up new entities, new LLCs. You're thinking about doing holding companies, real estate, adding your spouse as an owner, having LLCs and S-corporation. All of this requires tax planning. Your tax preparer that puts the right numbers in the right boxes is not going to be doing that for you. Thank you so much Until the next time.