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.
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.
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