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Avoiding Self-Employment (SE) Tax With LLC

Avoiding self employment tax with LLC

Saving self-employment (SE) tax on the business earnings of a partner or sole proprietor can be significant, with rates from 2.9% to 15.3%. Partners in some cases have avoided this SE tax on their distributive share for an interest as a limited partner in a limited partnership (LP). Today, however, LLCs are in much more common use than LPs for business and investment purposes. This makes it unfortunate that it’s still not clear that a passive member of an LLC can avoid the SE tax. Recently though, the Tax Court allowed limited partner treatment to a passive member of an […]

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Three Practical Tax Steps

Three Practical Tax Steps

In our last post, we detailed many of the new individual and corporate tax laws. Here we’ll take a closer look at three practical steps you should consider taking in light of these. 1. Revisit the income tax classification of your corporation or LLC. For decades now, the S corporation has been the income tax classification of choice for most non-real estate businesses. The fact that it offers a single level of tax versus “double taxation” in C corporations has mostly been the deciding factor. Now, while C corporations still expose their owners to double tax (first on corporate income […]

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