Differences between INC and LLC:


Many customers with entrepreneurial ideas have a variety of questions about establishing a company in the United States. What are the differences between different types of companies in tax returns? Are these differences good for you or bad for you? After the company is established, how should declare tax?


A: there are many types of companies, but startup clients typically choose one of two types of limited liability companies: INC or LLC. What these two forms of business have in common is that they are both limited liability companies, in which shareholders are responsible for only a portion of the capital invested in the company's debt. In other words, when a company incurs debts, the debts will not be involved in other assets and investments of the shareholders.


Significant differences between INC and LLC:


When company produces profit, who should pay tax, pay tax main body is company, still shareholder individual


1. When INC is profitable, the profits of the company are subject to federal and state taxes. Then, if the profits are to be distributed to shareholders, they are subject to personal taxes on the profits. That is to say, pay the tax twice. Of course, if the company is in the red, there is no need to worry about this problem.


2. INC has one of the most significant advantages of paying taxes twice: it can give W2 to individual shareholders. In other words, INC can pay salaries to shareholders, which can be used as expenses of the company to offset the company's profits. In this way, the tax burden at the company level can be reduced by paying salaries to shareholders, and the purpose of controlling shareholders' personal income can also be achieved.


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1. All income from LLC is distributed directly to individual shareholders and is exempt from corporation tax. So in the case of a profitable LLC, it is only necessary for the individual shareholder to pay federal and state taxes on the profits. But if one of those shareholders is a foreigner without a U.S. tax number, a company in the form of an LLC requires such foreign shareholders to file for a U.S. tax code. LLC will help foreign shareholders Withholding Tax (Withholding Income Tax).


2. LLC, on the other hand, cannot give W2 to shareholders. LLC, in other words, all of the amount of profit or loss is recorded in the personal income tax, in this way, for some insurance, loans, and other needs to declare dutiable goods, this form will be for your own personal income caused great uncertainty, it is also a lot of tax people interested in LLC, but ultimately did not choose to set up the cause of the LLC.


The above two reasons are why LLC is generally suitable for U.S. clients, while domestic clients are generally not suitable for LLC, because the tax matters involved for domestic clients can be quite complicated and not worth doing. So choose what kind of company form to want to decide according to business circumstance and stockholder individual family circumstance.


2. the establishment costs are different


There are also differences in start-up costs. The situation varies from state to state, but it is usually more expensive to set up an LLC. You can consult our account manager for the specific cost.


FAQ

FAQ

If you are registered with an INC company, you will have to file a corporate tax return once a year, even if the company is not operating. For example, if your company is established on April 12, 2016, your first fiscal year will be from April 12, 2016 to March 31, 2017. The deadline for filing tax returns is July 15, 2017 (the 15th day of the fourth month after the fiscal year).



If you are registered as a company of LLC type, the reporting year is from January 1 (or the beginning date of company registration) to December 31. LLC is special in that it is required to file a Partnership Return before March 15 each year to summarize the operation of the year without paying corporate taxes. Since LLC doesn't have to pay corporate taxes, it all goes to the individual, so the tax deadline is April 15 of the year.
How do I file business tax return?
If you are registered with an INC company, you will have to file a corporate tax return once a year, even if the company is not operating. For example, if your company is established on April 12, 2016, your first fiscal year will be from April 12, 2016 to March 31, 2017. The deadline for filing tax returns is July 15, 2017 (the 15th day of the fourth month after the fiscal year).



If you are registered as a company of LLC type, the reporting year is from January 1 (or the beginning date of company registration) to December 31. LLC is special in that it is required to file a Partnership Return before March 15 each year to summarize the operation of the year without paying corporate taxes. Since LLC doesn't have to pay corporate taxes, it all goes to the individual, so the tax deadline is April 15 of the year.
In addition to the annual corporate tax, there are also basic labor and sales taxes, which are generally reported quarterly.



Artificial tax refers to the company with the staff when you check (W2 form) need to pay the tax, a quarter of a newspaper, tax deadline is April 30, respectively (reported in 1/2/3 artificial), July 31 (reported in 4/5/6 artificial), Oct. 30 (reported in 7/8/9 artificial), Jan. 31 (reported in 10/11/12 manual).



Sales tax refers to the tax that needs to be paid when your company applies for a Sales Certificate. It is reported quarterly. When your company has sales business, it needs to collect the state's sales tax on behalf of the government and file quarterly, closing dates are March 20 (reported 12/1/february sales), June 20 (reported 3/4/may sales), September 20 (reported 6/7/august sales), December 20 (reported 9/10/november sales).
What are the other taxes besides corporation tax? What's the deadline?
In addition to the annual corporate tax, there are also basic labor and sales taxes, which are generally reported quarterly.



Artificial tax refers to the company with the staff when you check (W2 form) need to pay the tax, a quarter of a newspaper, tax deadline is April 30, respectively (reported in 1/2/3 artificial), July 31 (reported in 4/5/6 artificial), Oct. 30 (reported in 7/8/9 artificial), Jan. 31 (reported in 10/11/12 manual).



Sales tax refers to the tax that needs to be paid when your company applies for a Sales Certificate. It is reported quarterly. When your company has sales business, it needs to collect the state's sales tax on behalf of the government and file quarterly, closing dates are March 20 (reported 12/1/february sales), June 20 (reported 3/4/may sales), September 20 (reported 6/7/august sales), December 20 (reported 9/10/november sales).
Workers' compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue their employer for the tort of negligence.
What is workers compensation insurance?
Workers' compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue their employer for the tort of negligence.
The most common types of business taxes

Corporate income tax

Companies pay corporate tax only if they make a profit (New York state charges a fee whether they make a profit or not, with a minimum of $57 per year for the state and the city). The explanation is that your company's total revenue is subtracted from your costs (purchase costs, labor costs, expenses, etc.), and the rest of the profit is used to calculate corporate tax.

Payroll tax

Labor tax is required only if the company has employees and W2 is available. The main Tax on employers is the Social Security Tax and Medicare Tax on employees. The Tax rate is 7.65% of the employee's salary, which is paid to the federal government. Other taxes include Unemployment Insurance, which is paid to the state government.

Sales Tax
The most common types of business taxes
The most common types of business taxes

Corporate income tax

Companies pay corporate tax only if they make a profit (New York state charges a fee whether they make a profit or not, with a minimum of $57 per year for the state and the city). The explanation is that your company's total revenue is subtracted from your costs (purchase costs, labor costs, expenses, etc.), and the rest of the profit is used to calculate corporate tax.

Payroll tax

Labor tax is required only if the company has employees and W2 is available. The main Tax on employers is the Social Security Tax and Medicare Tax on employees. The Tax rate is 7.65% of the employee's salary, which is paid to the federal government. Other taxes include Unemployment Insurance, which is paid to the state government.

Sales Tax

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