corporate tax

LLC New York Business Taxation

by Fred Abramson on March 3, 2010 · 1 comment

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The IRS allows owners of LLC’s to make the decision themselves about how they want the company to be taxed.  The LLC can be taxed as in two general ways:

  • As a pass-though entity, like a s-corporation, sole proprietorship
  • Like a c-corporation

What is a pass though entity?

Usually business owners planning on forming a LLC at the startup stage decide that the LLC should be a pass through entity. What this means is that the corporation itself does not pay any taxes.  All tax profits and losses are reported by each business member on their tax return.  Like a sole proprietor, each owner files a schedule c.

If your LCC has more than 1 member be aware that each member must file the IRS Form 1065 and must be the same one used by the LLC.

How to Change your tax treatment

What makes LLC’s unique is the ability of its members to change the way it is taxed. You can elect to be taxed as a S or a C corporation.  To make this change, you only have to check the box that you wished to be taxed in form 8832 and simply file it with the IRS.  You can make this election at any time.  You will now be required to file corporate tax returns.

If you are interested in the entity being taxed as an S, simply file IRS Form 2553.  Be aware that to file as an S corporation, you have to meet its conditions.  Unfortunately, if you wish to change the way your LLC corporate taxed back to a partnership, you will have to wait five years to do so.

If you have any questions regarding starting a business in New York and tax issues related to it, contact me at the Law Office of Frederic R. Abramson at 212-233-0666.

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Your Small Business Must be Aware of 6 New Tax Laws for 2010

by Fred Abramson on January 28, 2010

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2010 tax year brings several changes to small business tax law.  I know, the thought of taxes isn’t a pleasant topic to think about, unless you are an accountant. However, a look now at the tax position of your company can help you assess how your business can benefit and comply with the amendments to the tax code.

Listed below are 6 amendments to the 2010 tax laws that could have an impact on your small business. This list is subject to change, especially since President Obama outlined in his State of the Union address that there will be more aid for small businesses.

  1. Reduced Mileage Rates. The mileage rate that businesses can use to deduct for automobiles has been lowered.
  2. Home Based Businesses and the First time owner tax credit. If you run your business out of your home and plan to purchase a home for the first time, there is a $8,000 tax credit. Be aware that you need to purchase your home by April 30, 2010.
  3. Cancellation of some Business Debt. The rules are a bit complicated, but certain businesses can decide to delay recognition of income from the cancellation of business debt in both 2009 and 2010.
  4. Domestic Production Activities Deduction. “Domestic production” applies to a restricted group of businesses including architectural, construction, engineering or a few other companies. In 2010 this deduction is upped to nine percent of qualifying business net income.
  5. Tax Credit for Research and Development. This tax credit was set to end in 2009. The House of Representatives has voted to extend the credit, however the Senate has yet to vote on it.
  6. Depreciation and Section 179 Expenses. Small Business had been able to deduct up to $250,000 of the cost of machinery, equipment, vehicles, furniture and other such propertused during 2009. In 2010, this limit is due to drop to $135,000.

These are just a few of the changes.  For more see, Tax Changes for Business by the IRS or contact my office at 212-233-0666 if you are in New York State.

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