LLCs and S-Corps — Understanding What They Really Do for Your Taxes
00:00:00.000 | Tax law is the tax law, right?
00:00:01.540 | It doesn't say like if an LLC, it's treated this other way.
00:00:04.500 | It's based on the tax entities and LLC is a legal entity, not a tax entity.
00:00:08.260 | So just forming an LLC does nothing.
00:00:10.680 | It doesn't make a business deduction, a business deduction.
00:00:13.080 | The business deduction is either already a business
00:00:15.300 | deduction or it's just not.
00:00:17.580 | And running it through your LLC.
00:00:19.740 | It's kind of that procedure versus substance.
00:00:21.640 | It's the procedure and it's not what's controlling.
00:00:23.400 | So the substance is like, what did you spend it on?
00:00:25.740 | And do you actually have a business?
00:00:26.980 | I like to keep things simple if you don't have legal liability and you're
00:00:30.100 | not doing anything other than sole prop treatment, you probably don't need the
00:00:33.020 | LLC or at least recognize it's not providing a tax benefit.
00:00:36.080 | S-corps, they work really well for businesses like service industry.
00:00:40.500 | Whenever there's not much equipment and not much third party debt, they work
00:00:44.940 | really well and then the minute you have more of a business with lots of vehicles
00:00:48.800 | and usually those vehicles are financed, right?
00:00:51.420 | Or real estate, all of those typically need to stay out of an S-corp.