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by dumbfoundded
2437 days ago
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Pass through tax liability. Let's say you did your accounting wrong and your company owes a bunch of money. These accounting mistakes usually account for double digit percentages of revenue. If you own an LLC, you get the benefit of only paying taxes once unlike a double taxed C-Corp. The cost is pass through tax liability. If your company owes taxes, the owners personally owe taxes. Let's take a real world example that happened to someone I personally know. They owned a dispensary, made some money not too much, everything going ok. IRS comes and says 4 years ago you did your taxes wrong. On revenues of ~$2.5M, she owed $400K that she deducted incorrectly due to 280e. In a day, she almost had her life ruined. She's back and opened a couple more dispensaries. She managed to survive others didn't. If you had created a C-Corp, the business goes bankrupt. IRS collects what it can. You go on your way. https://investinganswers.com/dictionary/p/pass-through-entit... |
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