Robert C. Jones, CPA recommends business strategies in the article “Aligning personal and business tax strategies can save you thousands of dollars.”
Why choose Limited-Liability Company?
For example, an LLC usually is a good choice of entity for a small business run by a husband and wife or a family unit. In a member-managed LLC, we may establish the wife as the operator of the business and the husband simply as a passive partner in the partnership. We set up the business so the wife owns 20 percent, yet is the managing member, and the husband owns 80 percent while having no control of the daily operation of the business. When the IRS considers the company’s income, only the wife’s 20 percent will be subject to self-employment tax or employer-side FICA and Social Security taxes. Furthermore, the husband’s 80 percent is considered investment or passive income and is taxed at a much lower rate than a salary or even pass-through net income would be, especially if the couple is in a high income bracket. Structuring a business in a way similar to this example can cut self-employment taxes by thousands of dollars a year.
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