LLC pass-through taxation isn’t an advantage to investors. This is because the profit would be taxed at the individual taxpayer’s tax amount (which is normally higher than the 21% tax rate paid by corporations). But in the event that this happens, LLC pass-through taxation wouldn’t be the best choice. It’s rare for a small business to carry over large amounts of profit from one year to the next, year over year. This means the business itself will not be taxed and the owner(s) will only have to pay taxes on their portion of the net income and on any dividends (distributions) they receive. Pass-through taxation means the net income (net profit minus expenses) of the business passes through to the LLC member(s) individual tax returns. This is because of how an LLC is taxed compared to a corporation. If you expect to spend most of your profit to pay LLC members/owners and grow your small business, an LLC is the right choice. ![]() Visit Our Guides to Learn More About Forming an LLCĬost to Form an LLC | How to Form an LLC LLC vs Corporation Taxes
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