Short question - I’m buying a LLC business - how much stuff should I put in it’s name to save on taxes?
I’m buying a business soon (trying to close by the end of the month), and am currently setting up all the accounts and insurance to do so. I will be running the company as a LLC.
I’m also starting to think about tax strategies. I know that a lot of small business owners have their cars owned by their companies, which allows them to be deducted as a company car expense. To do this, do I “sell” my car to my LLC (i.e. get title and insurance in the companies name)? If my car is worth $15,000, do I need to physically transfer the money from one entity to the other? Does this transaction make any sense?
Should I be retitling my other personal assets that will be used for company purposes in the LLC’s name, i.e. cell phone, internet service, etc., or does this make any difference in the end?
Thanks in advance,
I would think that you would get more practical advice from a CPA or somebody who specializes in tax affairs than you will get on this message board.
I’m just learning some of this stuff myself. I just became an S-Corporation and most of the rules are the same for an S-Corp and an LLC. I see that you are also in California so what I know should apply. You really should find a CPA and get advice from him. That will be money very, very well spent. I’ll just give you some very general information but realize that I am an engineer and this is second hand from what my CPA told me.
My understanding is that the asset (like your car) does not have to be owned by the LLC. You personally pay for the expense and the LLC will reimburse you for that and any other company expense. For example, about 50% of the time that I drive my car, it is for business purposes. I can write my self a check for half of my car expenses or do it on a milage basis (half of my milage at x cents per mile.)
Since I work out of a home office and my office is 10% of the floor space of the house, I write a check from my business account to my personal account for rent. The rent each month is 10% of my mortgage, utilities, insurance, etc.
For the phone, if it is used exclusively as a business line, just have the company pay for it directly.
In general, buying something for your company, rather than for yourself is like getting 30% off because you don’t have to pay taxes on that much of your profits (assuming you make a profit.) For example, I just bought a digital camera which I legitimately needed for business. It’s a write off and $100 or so of the $300 it cost will come back to me in saved taxes.
Hope this helps. Again, this is just to get you started. See a CPA ASAP.
You need a lawyer and a CPA.
Are you buying the LLC or just the assets associated with it? If it is a single member LLC the state you are in might make a big difference. Single member LLC are often considered “disregarded” entities and taxed like a Sch C business on your personal return.
Don’t buy a business with out talking to a lawyer.
Don’t try to do the book keeping with out talking to a CPA.
Maybe I’m wrong, but I was kind of under the impression that one cannot “buy” an LLC; if any portion of the membership and control of an LLC changes it is dissolved. So you could buy the assets and business accounts of an LLC but you’d have to set up a new LLC.
In terms of the company car thing, IRS rules are pretty specific on that. They know a tax dodge when they see one. If your ONLY car is the car owned by the company then it’s probably going to be considered split use. If you have another car for personal use then you can have the company “own” your car.
I’d third the reco to talk to a good CPA. Absent that you might want to go through Turbotax or a similar tax program and look at the part about automobiles.