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Limited Liability Company (LLC) and Partnership Taxation

A Limited Liability Company, commonly called an LLC, is a fairly new type of business structure that is popular because of its distinct financial advantages, taxation flexibility, and limited liability protection. Our Sarasota based certified public accounting firm Koontz & Parkin, CPAs can help you understand your business structure and taxation options.  We can form or restructure your company as an LLC to maximize the tax benefits and liability protection.  If you are already a member of an LLC, we can help you with our tax planning and tax preparation services.

For example as an individual, you could choose to form your business as a single member LLC, or as a two or more member partnership LLC.  For tax purposes, a single member LLC can be considered a Disregarded Entity and use a Schedule C tax form or file as an S-Corporation.  A multi-member LLC can be taxed as a Partnership, as an S-Corporation, or as a C-Corporation.   Understanding how your business structure affects your taxation is important.  Let Koontz & Parkin, CPAs assist you in structuring your LLC to maximize taxation and liability protection benefits.

Partnership Taxation

If your business operates as a partnership, you have several financial advantages with regard to taxation. A partnership is not taxable in and of itself; instead, it is considered a “pass-through” business, and all profits pass directly to the partners. The company’s profits and losses are then reported pro-rata on each partner’s individual tax return.  This offers partnerships a distinct advantage over corporations, which can often be taxed twice – once through corporation tax and again when each shareholder is taxed for his or her dividends.

Though partnerships do greatly benefit shareholders with regard to taxes, they do have one primary drawback. Because of the way partnerships are organized, individual members may face liability in lawsuits because of actions taken by another partner. Unlike a lawsuit against a corporation, in which only the company’s funds are at risk, a lawsuit against a partnership puts all of the individual members’ non-qualified financial holdings at risk, including private savings and investments.

Fortunately, there are ways to limit liability within a partnership. You can operate as a Limited Liability Company (LLC), which reduces member liability and is also considered a “pass-through” business, meaning that your taxes will even more closely resemble a partnership.

If you are confused as to the advantages of a partnership and how it compares to a corporation, S corporation, or LLC, or if you are not sure which business structure would most benefit your company, Koontz & Parkin CPAs can answer your questions and help you decide which structure will be to your company’s best advantage. If you are concerned that you are not operating in the most profitable way or that your members may be exposed to liability, they can also help you take steps to change your business structure to a more advantageous model.

Koontz & Parkin, CPAs in Sarasota, Florida to Learn More about the Benefits of an LLC or Partnership

Jo Ann M. Koontz and Marina Parkin, CPAs in Sarasota, Florida offer a powerful combination of in-depth knowledge and business experience.  To schedule a consultation, call the Sarasota office of Koontz & Parkin, CPAs at 941.328.3993.