Louisiana LLC Tax Question (1 Viewer)

[jrdbrn]

I would think it's a simple question, but Google does not agree.

If I want to make $24,999 a year with my LLC, how much tax would I pay to the feds and state? Also, do I have to pay med and ss tax?

I am putting in a bid of a lawn care contract at my workplace and want to know if it will be worth it to do this one property after costs.

Thank you

 

[CajunSaint]

LLC is considered a "disregarded entity" for tax purposes...simply put, it is treated as sole proprietorship and filed on the schedule C of your 1040. Meaning you will in fact have to pay SE tax on any profits of the business. Plus you would have to an income tax...how much income tax? Well depends on how much your other taxable income is and what your avg tax rate is.

Only way out is through an S corporation, but you have to pay yourself a salary anyways, so for $25,000 not really worth doing an S corporation....start profiting $75,000 and you got a different story.

There is also a C Corp...but we wont even go there for this example.

 

[jrdbrn]

Thanks. So a simple tax calculator will suffice when getting a rough tax figure.

 

[dtc]

LLC is considered a "disregarded entity" for tax purposes...simply put, it is treated as sole proprietorship and filed on the schedule C of your 1040. Meaning you will in fact have to pay SE tax on any profits of the business. Plus you would have to an income tax...how much income tax? Well depends on how much your other taxable income is and what your avg tax rate is.

Only way out is through an S corporation, but you have to pay yourself a salary anyways, so for $25,000 not really worth doing an S corporation....start profiting $75,000 and you got a different story.

There is also a C Corp...but we wont even go there for this example.

Wait. Can't he declare his LLC to be taxed as an S or C corporation in which case he doesn't have to pay SE tax if he were to pay himself a regular salary equal to or close to whatever earnings he'd have?

If I'm not mistaken, that's how my Nevada LLCs are set up. I pay myself a salary from one in particular that accounts for anywhere from 90-110% of the company's earnings. I withhold taxes and pay SS just like any other employee and I'm darn sure I haven't paid any self-employment tax in years though I guess icbw.

 

[dtc]

Thanks. So a simple tax calculator will suffice when getting a rough tax figure.

If you're going to contract with an entity to maintain their lawn for $25k per year, then by the time you expense/depreciate your mileage, tractors, and other equipment you could probably end up showing very little on paper. Certainly, you could offset a good deal of earnings with legally deductible expenses.

What is it, section 179 equipment deductions? That ought to save you a ton in the very first year. Every saw blade, string trimmmer, fertilizer, truck repair or mileage, cooler, ice.....

 

[CajunSaint]

Wait. Can't he declare his LLC to be taxed as an S or C corporation in which case he doesn't have to pay SE tax if he were to pay himself a regular salary equal to or close to whatever earnings he'd have?

If I'm not mistaken, that's how my Nevada LLCs are set up. I pay myself a salary from one in particular that accounts for anywhere from 90-110% of the company's earnings. I withhold taxes and pay SS just like any other employee and I'm darn sure I haven't paid any self-employment tax in years though I guess icbw.

He can, but for $25,000 there is no value. He will have to take a salary. Then if he does a salary he has to do 941s qtrly, 940s annually, file a W2, then he will have to file an extra tax return and likely have to find someone to file it for him.

That is a lot to save a few bucks in taxes for a side gig.

 

[boutrous]

LLC is considered a "disregarded entity" for tax purposes...simply put, it is treated as sole proprietorship and filed on the schedule C of your 1040. Meaning you will in fact have to pay SE tax on any profits of the business. Plus you would have to an income tax...how much income tax? Well depends on how much your other taxable income is and what your avg tax rate is.

Only way out is through an S corporation, but you have to pay yourself a salary anyways, so for $25,000 not really worth doing an S corporation....start profiting $75,000 and you got a different story.

There is also a C Corp...but we wont even go there for this example.

The question is will this be your only income or additional income? If it's your only income, then you will get taxed at the $24,999 rate. If it is additional income, then you will get taxed at the $24,999 + your additional income rate. This is for all salary wages, of course, which as CajunSaint explained, all of it will become in effect flow through salary with a standard LLC since I assume it will be a sole ownership LLC. If you structure your LLC as an S corp, you are allowed to split your income into salary and profit distribution. Salary portion will be taxed as described above and is actually subject to employee & employeer taxes. The profit distribution is un-taxed to your company, but flows into your tax return as additonal non-salary income, the same as any other stock earnings would. These earnings are subject to income tax, but not MED or SS. The stipulation is that you have to pay yourself a reasonable salary before you can pay yourself proft distribution. This is why, as CajunSaint pointed out, that for $24,999, it's probably not worth it to go this route, but you could always change to an S-corp in a future year if your company's income increased.