Tax Day On the Way: The 4 Ways You Can Tax Your LLC


This post originally appeared on the American Express OPEN Forum, where Mashable regularly contributes articles about leveraging social media and technology in small business.

The Limited Liability Company (LLC) is a hot business structure for startups right now — and for good reason. It offers all the personal liability protection without the red tape, paperwork and formalities that can be burdensome for a young startup, digital agency, small business or solo entrepreneur.

But after settling on the LLC for the legal structure, many small business owners are surprised to learn there’s still one more decision to make: how to be taxed. Certainly this is a big decision, as taxes are probably what drove you to select a legal structure in the first place.

Because the LLC is an entity created by state statute (and not the federal government), it offers flexibility when it comes to federal tax treatment. A single-member LLC can choose to be taxed as a sole proprietorship or a corporation (either C Corporation or S Corporation). Likewise, a multi-member LLC can choose to be taxed as a partnership or a corporation (either C Corporation or S Corporation).

Flexibility is always a good thing — you just need to know which option is right for you. Read on to learn more about the four different federal tax classifications available for the LLC.


1. Single-Member LLC as a ‘Disregarded Entity’


A single-member LLC is essentially taxed as a sole proprietor. As the name implies, you need to be the sole owner of the LLC. This classification falls into the “pass-through” taxation category” — the business itself doesn’t file any tax forms. As the owner of the LLC, you report business income or loss on your personal tax forms (Schedule C).

In addition, you will need to pay self-employment taxes if you’re engaged in active trade or business, for example, if you provide a service like copywriting or sell a product. If you formed an LLC for a passive activity such as a real estate investment, then you don’t need to pay self-employment tax on the profits (rather, you’d report your passive profits on Schedule E).

For example, let’s say Jonathan is a freelance UI designer who formed an LLC for his business. Through this work, he earned $75,000 in profit in 2011. He will report this income on his personal tax form and pay income taxes on the $75,000 at his individual tax rate, as well as pay self-employment taxes.


2. Multiple-Member LLC as a Partnership


For federal tax purposes, if an LLC has two or more members, it will be taxed as a partnership unless it makes an election to be taxed as an S Corp or C Corp (see below). In the case of a multi-member LLC taxed as a partnership, the LLC reports its business income on a separate 1065 partnership tax return. Then, each partner pays self-employment taxes on his share of the partnership profit on the Schedule SE tax form. As with the single-member LLC, self-employment taxes only need to paid if the LLC engages in an active trade or business.


3. LLC as a C Corporation


An LLC can elect to be treated as a corporation for tax purposes by filing Form 8832 with the IRS. In this case, the LLC files a corporate tax return 1120 and pays taxes on its profits at its corporate tax rate. If LLC profits are distributed to LLC owners in the form of dividends, those dividends are taxed again at the qualifying dividend rate (this is what’s known as double taxation).

The LLC profits are not subject to self-employment taxes, but an LLC treated as a C Corporation is responsible for payroll taxes on any wages paid to LLC members who work for the business.

If you prefer to keep profits in the company (as opposed to distributing any end-of-the-year profits to owners), a C Corporation would work. In this case, only the company is taxed on the profits; individual owners are not responsible for paying taxes on whatever money stays in the business.

For example, Judy owns a consulting company that earned $100,000 in profit. As an LLC treated as a C Corporation, the business would pay $34,000 in taxes on this income (assuming a 34% tax rate). If Judy then takes home that profit as a dividend, she would also owe taxes (at the 15% qualifying dividend rate) on the dividend payment. But if she decides to keep that money in the business (perhaps to expand her marketing budget next year), then she personally does not owe any taxes on the profit.


4. LLC as an S Corporation


In this last scenario, the LLC elects to be treated as an S Corporation. The S Corp files an 1120S tax return, but the company’s profits are not subject to corporate income tax like they are in the C Corporation. Instead, individual LLC owners are taxed on their respective shares of the company’s profits (and profits are not subject to self-employment tax). If an LLC owner works in the business, he must be paid a reasonable wage for his activities, and the LLC must pay payroll taxes on these wages.

Let’s say three friends start a social intranet company, and each owns one-third of the business. They form an LLC and elect to be taxed as an S Corporation. In the first year, the business earns $90,000 in profit. The LLC does not pay income tax on the profit. Instead, each owner includes his or her share of the profit ($30,000) in their taxable income on their individual tax return. And if the business lost $60,000 in the first year, each owner would include a $20,000 loss in his or her individual taxable income.


Do Your Homework


Choosing the right tax entity for your LLC is a complicated issue and will ultimately depend on all the unique aspects of your particular business needs, vision and circumstances. Investigate your options and stay on top of changing tax developments on both the federal and state levels that could affect your taxes. And since the decision can have significant financial implications, you won’t go wrong by discussing your particular situation with a tax adviser or CPA.


More Small Business Resources From OPEN Forum:

- Should Small Businesses Follow Everyone Back on Twitter?
- Are You Falling into the Pricing Trap?
- How to Innovate for Top Social Media Sites

Image courtesy of Image courtesy of iStockphoto, catenarymedia , Flickr, thinkpanama

More About: features, LLC, mashable, open forum, taxes

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from Mashable! http://mashable.com/2012/03/31/tax-llc/?utm_source=feedburner&utm_medium=feed...

Canada's Videotron finally delivers tru2way-based illico TV HD DVRs

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We've been waiting for the tru2way-based cable service Videotron promised since the end of 2009, and now it has finally delivered illico Digital TV. The software is being provided by Alticast, while HD DVRs available through Videotron and at retail are from Cisco and Samsung. While it's been a while and we can't quite remember where we put our excitement for all things OCAP (probably tossed when the retail availability dream died), Videotron customers can expect a new HD UI, widgets, and a 500GB DVR. At least in this initial push there's no mention of multiroom capabilities, although there is the ability to view video on demand content on PCs and mobile devices. It will start rolling out April 4th in the Greater Quebec region with other regions following soon, those interested can check out an English-subtitled trailer as well as a Francophone-only presentation video after the break.

Continue reading Canada's Videotron finally delivers tru2way-based illico TV HD DVRs

Canada's Videotron finally delivers tru2way-based illico TV HD DVRs originally appeared on Engadget on Thu, 29 Mar 2012 12:23:00 EDT. Please see our terms for use of feeds.

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from Engadget http://www.engadget.com/2012/03/29/canadas-videotron-finally-delivers-tru2way...

Use Keynote to Design Documents, Web Sites, and Other Atypical Items [Clever Uses]

Paul Woods at design firm ESPI notes that the team there hardly ever uses its Adobe Creative Suite tools to design web sites, presentations, or other design-needed items. Instead, everybody turns to Apple's Keynote, part of the $79 iWork suite. It's not so much that Keynote does everything well, as Woods is honest about the limitations, including the lack of robust hot keys. But the point is that, for many projects, Keynote's wire frame tools and wide range of export formats can get the job done quite well, once you learn how to use it outside the PowerPoint-esque assumption. More »


from Lifehacker http://lifehacker.com/5897210/use-keynote-to-design-documents-web-sites-and-o...

Enterprise YouTube – What the Heck Is It?

Ever since YouTube began its march toward becoming one of the most popular search engines on the planet, companies have been looking for ways to harness its power for business purposes.

Enter the term “YouTube for the Enterprise.”

But while this is hardly a new concept, if you look online, there’s not a tremendous amount of info on what it actually means. So I thought I’d take a crack at breaking it down as simply as possible.

First, what YouTube for the Enterprise IS

What this generally refers to is the idea of using video content for corporate communications. It’s not about video marketing. Mostly, it involves businesses looking to use on-demand video for training purposes and to keep their work force (particularly remote and mobile employees) better connected.

More importantly, what it ISN’T

What’s misleading about the phrase “YouTube for the Enterprise” is that, in most cases, it doesn’t specifically involve YouTube at all. Instead, it’s more about leveraging YouTube concepts for collaborative communications and on-demand learning through video. For example, as Gartner reports, enterprises are intrigued by the possibilities of sharing video content with services that mimic sites like YouTube and Facebook.

In other words, providing a platform where employees and company leaders can easily create and upload video content to be shared internally sounds, you know, cool. Videos can also be shared with partners, clients and prospects, of course, but not shared publicly unless there is some specific need.

Why it’s not really about YouTube

While YouTube is super easy, it’s also super public, and most companies don’t want their internal communications out there for the whole world to see. While you can make YouTube videos private if you’d like, it comes with a host of limitations. Most notably, private YouTube videos can be shared with no more than 50 YouTube users, and those videos do not appear on channel pages, making the organization of lots of videos a challenge.

As a result, many companies have begun looking for ways to securely create and share private video content in a way that’s similar to YouTube, without actually being YouTube. Some larger companies develop these portals themselves (IBM, for example, has its own “BlueTube” channel for internal video content). Others use third-party services or solutions, ideally cloud-based platforms that won’t clog up their corporate networks and storage with a bunch of locally-hosted video presentations. Google itself also offers some private video functionality as part of the Premier Edition of its Google Apps platform.

Brainshark, obviously, is an option for many companies, as they can use it to easily create video content across the company, house it in a private web portal and share and track across their organization. And of course, they still have the option of uploading those presentations as public YouTube videos if they want to.

What’s happening now?

A lot of companies are seriously looking at new ways to improve their corporate strategies, and on-demand video content has become a hot commodity. As Paul Miller, founder of the Intranet Benchmarking Forum, told GigaOM last year, “YouTube shows that videos capture interest and attention that words simple can’t… [it’s] always popular because it’s dynamic and fresh.” He adds that in a few years, he expects YouTube for the enterprise to become an even more established form of corporate communications.

Of course, there are still challenges, as businesses become more familiar with creating video content and training others throughout the company to easily do the same. This is where new technology has really helped, as the costs and skill required to create online video content is easier now than ever.

Cloud-based solutions remove most of the storage management issues for IT admins in regards to hosting a lot of video content. Couple that with the fact that the industry in general has become much more comfortable with cloud computing over the past couple of years, and there certainly seems to be a recipe for more enterprise video communications going forward.

Brendan Cournoyer is a Content Marketing Manager with Brainshark. You can follow him on Twitter @brencournoyer, and visit the Brainshark Key Uses page to learn more about how video presentations can benefit your overall marketing strategy.

from BostInno http://bostinno.com/channels/enterprise-youtube-what-the-heck-is-it/

Satellite-jamming becoming a big problem in the Middle East and North Africa

The Arab Spring has had yet another consequence—satellite jamming, and the practice is serious enough to threaten the satellite operators' business. Two operators, Arabsat and Nilesat, complained about the jamming in the Satellite 2012 Conference in Washington, D.C. last week, according to an article in Space News. Arabsat is a 21-country consortium that provides broadcasting to over 100 countries in the Middle East, Africa, and Europe. Nilesat is an Egypt-based operator that carries 415 channels to the Middle East and North Africa. The satellites also provide broadband, telephone, and VSAT service.

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from Ars Technica http://arstechnica.com/science/news/2012/03/satellite-jamming-becoming-a-big-...

Congress Approves Startup-Focused JOBS Act


The House of Representatives voted to pass the Jumpstart Our Business Startups (JOBS Act) Tuesday, a bill that aims to make it easier for startup businesses to raise capital, partially via online crowdfunding.

The measure passed 380-41 and is headed to the White House for President Obama’s signature.

It’s the second time the House passed the JOBS Act. It sailed through the House earlier this month on a bipartisan basis after being introduced by Republicans, but found opposition in the Senate.

The Senate passed a version of the bill amended to place more safeguards on the crowdfunding process last week, but the House’s go-ahead was needed before the bill could be sent to the president.

The JOBS Act would create a new class of business known as “emerging growth companies,” a category that would include most startups. These companies would be allowed to attract investors online through crowdfunding — much the same way that groups raise money via platforms such as Kickstarter.

They would also be able to sell up to $50 million in shares before having to register with the Securities and Exchange Commission, as well as have up to 1,000 shareholders — double the current maximum.

The version of the bill passed by Congress requires startups to deliver financial reports to investors in an effort to increase transparency and prevent potential fraud. That restriction wasn’t part of the original bill, but added in the Senate through an amendment sponsored by Sens. Jeff Merkley (D-Ore.) and Scott Brown (R-Mass).

Supporters of the JOBS Act, including entrepreneur and #FixYoungAmerica organizer Scott Gerber, argue that it will generate a much-needed boost for startups and the economy at large.

“The passage of the JOBS Act in Congress is a major step for the #FixYoungAmerica initiative and a victory for our nation’s entrepreneurs,” Gerber says. As a result of the tireless efforts of Congressman Cantor, Congressman McHenry, President Obama, and members of both the House and Senate, a whole new generation of aspiring young business owners will have access to a new pool of capital that they will be able to utilize to rebuild the American dream, and revitalize the national economy.”

The legislation’s opponents, such as Sen. Dick Durbin (D-Ill.) have argued that it involves excessive and dangerous deregulation of businesses.

“The bill’s supporters have characterized it as a jobs bill, but this bill is really designed to change disclosure, accounting and auditing standards and to exempt many firms and corporations from the Securities and Exchange Commission oversight,” Durbin says.

President Obama has expressed his support for the bill, and he’s expected to quickly sign it into law.

Image courtesy of iStockphoto, franckreporter

More About: Business, congress, jobs act, Politics, Small Business, Startups, US


from Mashable! http://mashable.com/2012/03/27/congress-approves-jobs-act/?utm_source=feedbur...

Matt Ruff discusses his alternate history novel The Mirage

Rick Kleffel's always-great Agony Column podcast interviews Matt Ruff about his extraordinary "golden rule" alternate history novel The Mirage, in which the Arabia is the cradle of democracy, the USA is a collection of basket-case Christian theocracies, Germany has been partitioned in a two-state solution that makes Berlin the capital of Israel, and a war on terror is launched when Christian "crusader" terrorists crash jetliners into Baghdad's Twin Towers. The Mirage is very likely to be the best novel I read in 2012, and Ruff is very coherent and interesting in discussing his work.

Matt Ruff is anything but a tortured soul himself, and that makes the creation of a novel like 'The Mirage' all the more remarkable. He's easygoing but clearly very meticulous, very particular about his writing. He's got a lot to say about his new novel, and what is refreshing is that he can sy it and still have the entire novel left for the reader as a fresh new experience.

Generally, I don't arrive at an interview with specific questions in mind, but my producer at KUSP had asked me, essentially, just what the heck did Matt think he was doing? Ruff of course knew exactly what he was doing and why. But he head a lot of new stuff to tell me about the novel, in ways I thought really opened up the book for me.

The origins of the book are not based in the politics. In fact to the degree it can be, this is not a very political novel. Even though this book sports a great plot, and a fully-fleshed alternate reality, this is really a book about perceptions, and that includes the reader's perceptions. Plus, it's fun.

03-26-12: A 2012 Interview with Matt Ruff (MP3) (Thanks, Matt!)

from Boing Boing http://boingboing.net/2012/03/26/matt-ruff-discusses-his-altern.html?utm_sour...

Sky Anytime+ now available via all broadband providers

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We knew it was coming, but now it's finally landed. Yep, those Sky+HD subscribers who get their internet from elsewhere are now free wander into the formerly fortified town of Anytime+. For the first time, all Sky+HD users with broadband can access the full range of online programming, which includes content from the BBC and ITV. Not a Sky customer, but like the sound of this? Sky's already thought of that, and should have something to ease your pain anytime now.

Sky Anytime+ now available via all broadband providers originally appeared on Engadget on Sun, 25 Mar 2012 04:22:00 EDT. Please see our terms for use of feeds.

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from Engadget http://www.engadget.com/2012/03/25/sky-anytime-now-available-via-all-broadban...

The MIT Media Lab Goes Viral: 11 Projects Aimed at Changing the Way We Communicate

The MIT Media Lab is broken down into 26 different research groups. From “Macro Connections” to “Camera Culture,” each team is focused on an innovative end goal. Throughout this past year, one group, “Viral Spaces,” has focused on proximal networking, hoping to facilitate discourse between real people in real places. From Junkyard Jumbotron’s large digital displays to Peddl’s brand-new balanced marketplace, here’s a look at 11 of the projects aimed at changing the way we communicate.

Brin.gy — The open-source project allows people to announce bits of information about themselves and then find others based on that information. Utilizing “Human Discovery Protocol,” users can form dynamic groups of people with similar expertise, those interested in buying the same product, people in the same location, or a mixture of all three.

Geo.gy — Geo.gy is a location shortener service that uses HTML5 to detect your location and then provides you with a short URL to a pointer on a map. Through Geo.gy, users can add text to a post, tweet or SMS. Sure, Twitter allows for geolocation already, but when someone re-tweets your tweet, your location information is lost. Not with Geo.gy, however.

Ghosts of the Past — Curious to see what the past looked like from exactly where you’re standing? Ghosts of the Past allows users to create, save and geotag panoramic canopies. Anyone who visits the same space after you can then see what you’ve seen, joining with you to create, what the team calls, “time-lapsed socialization.” Using full-circle panoramas and an iPad 2, memories are overlaid on top of physical space.

Junkyard Jumbotron — Working with laptops, smartphones and tablets — anything that runs a web browser — Junkyard Jumbotron allows users to take several random displays and stitch them together into one large, virtual display, simply by taking a photograph of them.

Meld — By presenting your social graph as a moving picture, Meld breaks away from the text-centric social networks we use today, and offers a more holistic view instead. You can now visually explore your social life.

NewsFlash — NewsFlash is a collaborative way to experience news from around the world. It’s as simple as pointing your phone at a headline or photograph and then snapping a picture. What happens is, the data emanates from the screen and is captured by your cellphone camera, later allowing any number of people to see the article at once. Users can also take their scanned article on the go, so your NewsFlash history stays with you, even as you move away from the display.

Peddl – Both iPhone and web-enabled, Peddl has become one of the easiest ways to buy and sell things with the people around you. Using two key phrases — “I want [this], and it’s worth [that]” and “I have [this], and it’s worth [that]” — Peddl has created a balanced marketplace. Even better, using Peddl, sellers can instantly connect to buyers and are able to communicate directly through text or by phone without ever having to provide their telephone number or email address.

Recompose — Recompose is a new system for manipulation of an actuated surface. (Or, in less formal words, “So cool.” Just check out the video below.) By using the body as a tool for direct manipulation, alongside gestural input for functional manipulation, the team shows how a user can be given unprecedented control over an actuated surface.

Social Energy — Focused on the idea that most people don’t have a sense of how much their actions can affect a building’s energy use, the Social Energy team is testing the hypothesis that “if people have a convenient way to record their energy use and learn ways to improve it, they will change their habits.” They’ve created visualizations of HVAC use throughout the Media Lab, and have been allowing people to not only see a heat map of their lab area, but compare their energy usage to those in other areas throughout the Lab.

T+1 — T+1 is an application that allows groups to organize their interests and schedules. With T+1, users receive instructions and send their personal information through their mobile device at specific times. At each time step, T+1 gathers together users’ interests, opinions and locations to compute and optimize the structure and format of group interactions for the next interval. The team writes that they hope to deploy the platform in settings ripe with academic and political discussions to analyze how user opinions and interests evolve over time.

X-Ray Audio — Using X-Ray Audio, drivers can join voice chat rooms and hear the voices of other drivers around them. Users can move their listening position further up or back down the road with the use of voice commands, as well as up-vote any helpful drivers they encounter. By creating a voice conference attached to a locale, the team says they’re enabling people to continue the experience of a close-quarters discussion over any distance. Just watch the video below to see X-Ray Audio in use for yourself.

from BostInno http://bostinno.com/2012/03/25/the-mit-media-lab-goes-viral-11-projects-aimed...