Hot answers tagged tax
12
Be careful. Although you only file your income tax form once a year, depending on your situation, you may have to pay quarterly estimated taxes. If your LLC is profitable to the point where you will be required to pay income taxes and you are not employed by someone else who withholds taxes for you, you will most likely have to pay estimated taxes. Talk to ...
11
When I first started out in business I had only a personal bank account and a home office. I was audited by the IRS, and they sent two agents who worked in my home office for four days. In the end, I owed nothing, but they told me most of their auditing would have been unnecessary if I had a spearate business bank account.
Get a separate bank account for ...
10
You are missing an important big-picture issue:
To the extent that you fail to segregate corporate funds in a corporate bank account, separate from your personal bank account, you are opening yourself up for "alter ego" personal liability, i.e., you are inviting a court to disregard the corporation - making you personally liable - because you failed to ...
9
You need to hire an accountant. Even though you made no money and owe no taxes, your business still has to file a tax return. In addition, there will probably be loses your first year and your accountant will show you how to carry those loses forward into future years to lower your taxes when you do begin to make money.
9
LLCs will give you a legal 'shield' that a sole-proprietorship will not but all other costs will generally be lower with a sole proprietorship.
I can't say about grants but bank loans should be the same both ways in that for a startup the bank will want you to personally guarantee the loan anyway.
Writing off startup costs should be the same both ways, at ...
9
It is a common misconception of entrepreneurs that control flows from owning a majority of the stock.
Stock ownership and control are separate and independent.
Control is determined by the legal documents you draw up when you form the company. The most important documents are the company bylaws, which determine how the company operates, and the shareholder ...
8
You’re trying to relate two topics that are unrelated. Paying quarterly taxes has nothing to do with the tax structure of your LLC.
I understand that an LLC filed as a Partnership to use Pass Through taxation is not required to pay quarterly taxes.
If the LLC is taxed as a partnership, technically it doesn’t pay quarterly taxes, but it’s important to ...
7
The first answers here accept the basic premise of the question, that one should consider incorporating overseas to benefit from lower tax levels / less regulatory overhead / more streamlined intellectual property regulation, etc.
I'm going against the grain, and say that 99% of all entrepreneurs should not consider this, they should initially focus on ...
7
Tax policy is a lot more complex than simply finding a country with the "lowest tax rate". Multiple rates come into play, for corporate and personal income.
Dubai has zones that are 100% tax free. These zones include one for Internet ventures. As a US citizen it does not matter if you operate in a 100% tax free zone. All income earned, foreign and ...
7
Much of this is really just advanced common sense.
Customer trust, which either helps or hurts sales. To some extent, seeing a physical company address builds trust with US customers, and perhaps some trust with other nationalities as well. Seeing an address on the Cayman Islands etc reduces trust -- the customer may quite rightly feel that he's at a ...
7
You'll have no issues using the money in the UK, because you will already have been required to declare it on your UK tax return and pay tax on it in the UK, unless you wish to evade UK tax and thus become a criminal. Only registered non-doms can legally avoid paying tax on their overseas earnings, and you're clearly not a non-dom because you say you're ...
6
Both LLCs and S Corporations offer limited liability while providing pass-through taxation. The way they are taxed, however, is entirely different under the tax code. LLCs are taxed under Subchapter K (the same as partnerships) and S Corporations under Subchapter S (unique to S Corporations). Here are a few things to keep in mind:
S Corporations
- Only ...
6
What you're asking about is something called "nexus". Nexus is the minimum level of commercial activity within a jurisdiction that is enough to cause a business to fall under the jurisdiction's tax regulations, such as collection and payment of sales tax.
Some business activities clearly fall under the definition of nexus, such as operating an office in a ...
6
Depends on what tax you're referring to. I'm assuming you're asking about income taxes, but there are other taxes an LLC may be required to pay. For example sales tax and state fees for having the privilege of doing business in that state. And there may be other taxes depending on your particular case.
In the case of sales tax and state fees you'll have to ...
6
You never ever want to hire overseas employees, regardless of what US law has to say about the subject -- worry about the laws of Venezuela, Philippines etc instead. It potentially brings a huge overhead with regards to overseas tax withholding rules and foreign legal system.
There are 2 common routes when you're engaging with specific people you like that ...
6
Depending on how you opted to tax your LLC, there may be a tax advantage to getting the company's profit down to 0. (Getting the bank account down to zero sounds like a bizarre old-wives' tale)...
Here are the details:
An LLC can be taxed as a pass-through entity (the default) or, if you filed IRS Form 8832, like a corporation.
If the LLC is taxed like a ...
6
Sales taxes are determined by the individual state, county or city. You are required to file & pay sales taxes in any state where you have a nexus, or physical presence. In most cases this would be an office or retail type location. If you and the customer both reside in a state where you have a nexus, then you would be expected to pay the sales tax ...
6
Your personal income is separate from your company's revenue. You and your company are separate legal entities.
The VAT threshold applies to your company (self-employed traders also have to consider VAT but that doesn't appear to be relevant in your situation if your other job is not self-employment).
You are only obliged to register for VAT if you reach ...
6
Welcome to the joke called European Union. Ideally is all easy and unified, you can move between countries, work everywhere, live where you like. In practice, that's a mess and governments actively discourage that.
Let's start with the theory
you pay corporation tax in the country where the company is incorporated. So if your company is in Cyprus you pay ...
6
How should I handle putting my own money into the business account so I can avoid double taxation?
You are mixing two unrelated topics. Double taxation has nothing to do with your bank accounts.
Double taxation refers to the fact that income is taxed twice. This occurs when a corporation's profits are taxed at the corporate level, and then a second ...
6
Read Apple's Terms and Conditions
If there is nothing specifically in the terms and conditions that prevent someone your age from signing up as an Apple Developer, then you shouldn't be breaking any rules or laws. You may need help paying the fee; however, since you can't legally apply for the credit card you would need to pay Apple's developer fees. Since ...
6
You can do it on-line at IRS.GOV (here's the direct link to the EIN page). If you don't want to apply on-line (and get the number instantly), you can instead fill and send the form SS-4 (and wait for the number for several weeks to arrive in the mail).
Make sure to read all the information and the instructions on the site to understand how to fill the form ...
5
The income on an LLC is passed through to members each year. That means whatever you make, you have to pay personal taxes on it even if the money stays in the LLC (via a Schedule K1). The key word here is makes money. Some LLC's (like the ones that hold property), can depreciate the property value -- thus offsetting any cash gains.
LLC's can also be setup ...
5
I am a business attorney and not a tax advisor. I have, however, been in the position of researching and advising many clients on this point. So, with the caveat that you should not rely on my tax advice, but rather consult at tax professional, I can offer you the following:
Electronic payment systems and software is a fairly developed space. There are ...
5
Is it worth setting up a corporate bank account or finding an accountant?
Set up your business bank account now. It costs you nothing and keeps your personal and business finances separate. Right now you are basically operating as a sole-proprietor (assuming you're the only owner). Not only will this cause you to lose your liability protection, but the ...
5
Yes, it is perfectly legal to do this. In fact many businesses, small and big, play these sorts of games to reduce their tax bills. A good accountant can help you with this.
Something to keep in mind, however, is your accounting method. Are you using Cash or Accrual? The technique you describe mostly makes sense with cash accounting, not accrual. In cash ...
5
Here's an overview of the different taxes for each entity type:
C Corporations
There will be 1) Corporate Income Tax (with a top rate of 38%) 2) Dividend Tax when taken out personally (15% currently), 3) Payroll tax on officers (which are required) which is roughly 7.2% to the corporation and 7.2% to the officer, but only on the salary. The officer is then ...
5
Cash that you put into your corporation can be assigned to either a Capital Stock account or a Loans Payable (from the corporation's perspective) account. The choice of which one is pretty much up to you.
If you go with Loans Payable, the corporation can pay you back at some point.
If you go with Capital Stock, you will receive additional shares in ...
5
Currently, you have to file a 1099-M (or Misc.) for any subcontractor to whom you pay in excess of $600 per year.
Here are they IRS instructions http://www.irs.gov/pub/irs-pdf/i1099msc.pdf .
You should have all subcontractors complete a W-9 so you have sufficient information to file a 1099-M when and if they cross the $600 limit.
Most potential ...
5
For example, it seems that the rules are different depending upon whether my customer will be using it for business or personal use (how will I know!?) and what country they're in. If they're in an EU member state then I need to charge VAT at their rate, not the UK rate, etc, etc, etc.
Yes, that is correct. The part of the customer using it for personal ...
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