Video instructions and help with filling out and completing Form 8453 S Entities

Instructions and Help about Form 8453 S Entities

Music hi brand Avis with David CPA group again I want to talk to you all about LLC limited liability companies talked before about different types of entity structures and I want to talk a little bit more in depth about limited liability companies so a limit liability company which is an LLC isn't any that is created - whenever you're starting a business it's one any selection options that you have and it's used basically to isolate some of the liability you have as being a business owner a lot of people start off a business particularly a small business as a sole proprietorship meaning that they're the sole owner you know my name is Brandon Davis and if I'm going to create you know Brandon Davis's carpet cleaning and I open up a business checking account my local bank and I get some business cards from the website or from the internet and two up a little website start doing business under my personal name and my personal tax ID number which is my social security number I'm the sole proprietor so when I go in and I do that carpet cleaning business and I take care of my customers any any positive thing is is is reflected on me personally any negative thing that might happen maybe I ruined someone's carpet well that liability within following me also well a limit liability company allows you to take that that liability exposure that you have personally and kind of put a box around it and so you're creating a separate legal entity separate from yourself to have its own identity and it's called again a limited liability company so I may call myself you know Brandon's Carpet Cleaning which should you use a smaller name huh LLC meaning limited liability company and so once I create my entity now I've basically told the world by filing some paperwork with the Secretary of State's office which an attorney will help you do that once I once I filed that that paperwork to accrete LLC I've now put a box around the liabilities and my business is inside this box and I own the Box I own the LLC so I'm up here here's me and I own a hundred percent of this box call an LLC you may be thinking well that's great what does that done for you well it's protected you little bits giving you some liability protections but one things I want to talk about as a CPA is some of the tax implications of what we've just done here I talked about before or right when Y before I set the LLC if I had just Brandon's carpet cleaning business and I was the sole owner of it and I was the sole proprietor well I'm taxed as a sole rider on my personal tax return which is means I file a Schedule C which is a Schedule we put you report all your business and income and expenses a part of your personal tax return it's very simple its straightforward and it works very well the issue there though is one hundred percent of my net profits on this Schedule C are subject to what's called self-employment taxes I want to write that down that's self-employment here because it's self-employed income so I'll have self-employment taxes and I self-employment tax rate and I'm kind of got to make it easier simple force is 15.3% okay and so that's kind of a lot you know and that's in addition to the income taxes that would be paying on that on those net earnings also which again are part of our personal tax returns well if I create this LLC and it's a small business and I'm a hundred percent owner the default treatment of that for tax purposes is a sole proprietorship basically for tax purposes I've not done anything different by creating us LLC because it's called a disregarded entity from the IRS the standpoint I'll write that down again a disregarded entity disregarded and and so I've got to do something about that if I want to make a difference so one of the things you can do with an LLC and one of the things I like about LLC's is their flexibility from a tax perspective I can take that LLC that was the sole proprietorship when I started and I can make an election with the IRS called a subchapter S election or entity classification election and change from being taxed as an LLC tax as they sold prior shift to be an LLC tax as a corporation and I can take that corporation step further and make it what's called an S corporation well you may be asked why do I want to do that well there may be some tax advantages and accomplishing that now there's some caveats that that play into it and I'm simplifying you know some of the things to get us from point A to point B to show you some examples here so there's definitely some things you want to talk about relative making sure you have maybe employees or other ways to leverage you know your earning power in the business but say I get to the point where I've grown my carpet cleaning business I got two employees I'm paying and they're out cleaning carpets I'm making a return on my investment in those employees well then I might have an argument to say you know what maybe I should be an S corporation maybe I should be an S corporation and actually be an employee of this S corporation well you may be asking well what's that gonna do for me well what it does is now I got me out here 100% under this LLC and I got this box well this box now is a separate entity for tax purposes so if I file it's called a form