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LLCs and S-Corps — Understanding What They Really Do for Your Taxes


Transcript

Tax law is the tax law, right? It doesn't say like if an LLC, it's treated this other way. It's based on the tax entities and LLC is a legal entity, not a tax entity. So just forming an LLC does nothing. It doesn't make a business deduction, a business deduction.

The business deduction is either already a business deduction or it's just not. And running it through your LLC. It's kind of that procedure versus substance. It's the procedure and it's not what's controlling. So the substance is like, what did you spend it on? And do you actually have a business?

I like to keep things simple if you don't have legal liability and you're not doing anything other than sole prop treatment, you probably don't need the LLC or at least recognize it's not providing a tax benefit. S-corps, they work really well for businesses like service industry. Whenever there's not much equipment and not much third party debt, they work really well and then the minute you have more of a business with lots of vehicles and usually those vehicles are financed, right?

Or real estate, all of those typically need to stay out of an S-corp.