MAKING APRIL 15TH YOUR FAVORITE DAY
was taxed as a corporation. An LLC with one member is not treated as a separate entity for income tax purposes unless it elects to be taxed as a corporation.
So, what’s the best way to hold your company? There is no easy answer for that. It’s something that you should discuss with your CPA. These previous sections are not designed to be all-inclusive about each of the types of businesses you can own. We’ve left out limited liability companies, limited partnerships, and a few others that may be more suited to your situation. But, this is just a way of showing the positive tax implications of incorporating your business and comparing the tax consequences of corporations to those involved with owning a sole proprietorship or general partnership.
TAX REDUCTION, NOT TAX EVASION
While we’re discussing possible ways to reduce the amount of money you pay out to the government in the form of taxes, it’s important to specify that tax reduction is legal, but tax evasion is not. Unfortunately, there are many people in the world who will try and convince you to follow their advice to help eliminate the need for you to pay taxes.
Recently, criminal investigations into fraudulent types of trusts from around the country have begun to receive national attention. The federal government has even issued a warning to taxpayers to avoid scams that promise to “untax” you from the income tax system. These scams include using both domestic and foreign trusts to divert income from individuals so that they don’t have to pay income tax. However, these schemes are not only illegal, they will wind up costing the par- ticipant quite a lot of money. If you find yourself in the middle of one of these schemes, you’ll also find yourself out of a lot of money. First, there will be a fee for the service that is provided by the scam pro- moters. This could be as little as $1000, but there have been cases where the service fee is as high as $70,000. Of course, the promoters will charge whatever they think they can get out of the individual; they generally target those whose income is greater than $100,000 per year. Second, once the IRS finds out (and they will) the participating individual will face fines, interest, possible jail time, and the payment of all back taxes. Does that sound like a good idea to you?