Trump Tax Plan-Professional traders.

[Sig]

An LLC is actually not a tax vehicle. An llc can be taxed as a partnership, s-corp, a sole proprietorship, or even a c-corp : each which has different tax rules.

The vast majority of LLCs are set up for their pass-through entity quality. Technically yes, you can elect to be taxed on an LLC. The number of LLCs that elect this are vanishingly small and it would only be for an obscure, probably ultimately tax sheltering effect.
Can you give us a scenario where it would be advantageous for an LLC to elect to be taxed as each of the entities you listed? I've always assumed there was such a scenario but never seen it or figured out what it would be.

 

[beerntrading]

A LLC is an insurance vehicle. Literally, a company to limit liability. It primarily provides a corporate veil to its members for business operations...

 

[tiddlywinks]

LLC owners AND members taxed at the federal level as a single member (sole proprietorship) or a multi-member(partnership) CAN NOT be employees. They receive a "draw", a return of capital, whether or not the capital was actually paid or not. They can have "guaranteed payments", but guaranteed payments may negate otherwise beneficial tax treatments such as section 1256 tax treatment for example.

S-Corps are pass-through, with rigid requirements, but owners and shareholders can be employees. Distributions outside of employment wages can be distributed to all shareholders and can be engineered to be free from SE Tax, in addition to cost-basis engineering. Part of the rigidity of an S-Corp, or an LLC elected to be taxed as an S-Corp at the federal level is there can be only 1 class of stock. There can be voting and non-voting shares, but each share has the same exact entitlements and percentages to gains, losses, credits, etc.

C-Corps, from a a trading standpoint, along with double taxation of dividends, also suffer from negation of otherwise beneficial tax treatments, for example section 1256 tax treatment is lost completely in a C-Corp.

Oh yea.... don't forget, the entity must qualify for and properly elect TTS (trader tax status), and any other desired elections.

 

[newwurldmn]

The vast majority of LLCs are set up for their pass-through entity quality. Technically yes, you can elect to be taxed on an LLC. The number of LLCs that elect this are vanishingly small and it would only be for an obscure, probably ultimately tax sheltering effect.
Can you give us a scenario where it would be advantageous for an LLC to elect to be taxed as each of the entities you listed? I've always assumed there was such a scenario but never seen it or figured out what it would be.

As i understand it the only reason to have an llc is for the limited liability and the corporate veil. You can get the pass through anyway as a partnership, s-corp, or some proprietarship. The concept of an llc is fairly new. The taxiation vehicles listed above are not.

I had two llcs: one taxes as a sole proprietorship that is a holding company and another taxed as a c-corp. the c-corp one was a debacle. My partner and i called it an llc for some random reason but wanted c-corp taxiation because it's more beneficial if you are highly levered and paying down debt. It turned out that an llc couldn't receive certain tax exemptions in my state and we ended up converting to just a c-corp.

 

[just21]

Yes, he proposes 15% and settles at 20% or 22%. Better than asking 20% and getting 27%

I did try to read the Art of the Deal and downloaded the Kindle preview but it just seemed like a list of phone conversations with "uge adjectives describing them. Could anybody precis the book?

 

[Sig]

LLC owners AND members taxed at the federal level as a single member (sole proprietorship) or a multi-member(partnership) CAN NOT be employees. They receive a "draw", a return of capital, whether or not the capital was actually paid or not. They can have "guaranteed payments", but guaranteed payments may negate otherwise beneficial tax treatments such as section 1256 tax treatment for example.

S-Corps are pass-through, with rigid requirements, but owners and shareholders can be employees. Distributions outside of employment wages can be distributed to all shareholders and can be engineered to be free from SE Tax, in addition to cost-basis engineering. Part of the rigidity of an S-Corp, or an LLC elected to be taxed as an S-Corp at the federal level is there can be only 1 class of stock. There can be voting and non-voting shares, but each share has the same exact entitlements and percentages to gains, losses, credits, etc.

C-Corps, from a a trading standpoint, along with double taxation of dividends, also suffer from negation of otherwise beneficial tax treatments, for example section 1256 tax treatment is lost completely in a C-Corp.

Oh yea.... don't forget, the entity must qualify for and properly elect TTS (trader tax status), and any other desired elections.

LLC owners can certainly be employees. In fact most are. There is a requirement that you pay any LLC member who is an employee a "reasonable wage" so that the LLC isn't used to avoid Medicare and SS tax. If the LLC is used as a tax shelter now it's through minimizing this pay to avoid Medicare taxes since "reasonable wage" is virtually impossible to quantify.

 

[zdreg]

With that logic he should have asked for -100 and settled at -25! Putting out crazy unreasonable initial offers isn't how good faith negotiations with people you'll need to negotiate with over and over with works. As Trump is learning, or would be if that was possible for him.

that is a false extrapolation. it is time you take a course in logic 101.

 

[Daal]

since "reasonable wage" is virtually impossible to quantify.

You could say the same thing about 'arms length' transactions. yet, its in the books and the IRS goes after people/companies who they think are violating that

 

[Sig]

You could say the same thing about 'arms length' transactions. yet, its in the books and the IRS goes after people/companies who they think are violating that

They go after people they think are violating the "reasonable wage" as well. It's actually an issue both for LLCs and C-corps. If you are an owner/employee of a C-corp you try to maximize your wage to avoid double taxation, opposite for an LLC. The problem for the IRS folks is that if I can show a handful of doctors/lawyers/consultants/whatever my profession is...who is making at least my wage or no more than my wage, depending on what you're trying to prove, then it's reasonable. Since the hi/low on any profession is massive it's virtually impossible for the IRS to win on these one's unless you're just ridiculous and pay yourself $1. They've had very little success and a couple of big losses so they don't pursue say an attorney paying themselves $120K and distributing $500K to themselves because $120K is a "reasonable wage" for at least some attorneys. If you pay yourself to at least max out your SS contribution it's virtually a safe harbor in effect.

 

[tiddlywinks]

LLC owners can certainly be employees. In fact most are. There is a requirement that you pay any LLC member who is an employee a "reasonable wage" so that the LLC isn't used to avoid Medicare and SS tax. If the LLC is used as a tax shelter now it's through minimizing this pay to avoid Medicare taxes since "reasonable wage" is virtually impossible to quantify.

You exist merely to argue, don't you?

A single member LLC by default will be taxed the same as a sole proprietorship.
The owner of the LLC CAN NOT BE AN EMPLOYEE.

A multi-member LLC by default will be taxed as a partnership.
The owners and members of the LLC CAN NOT BE EMPLOYEES.

"reasonable wage" applies to subchapter S corporation taxation, where owners and shareholders CAN BE employees. An LLC, single member or multi-member, must make a formal election to be taxed at the federal level as a corporation, and further, electing subchapter S status.