Discuss: This Web Business IV: Business Entity Options

by Scott Kramer

11 Re: Bottom Line

OK, let’s say I have a Web Design LLC (A) and a Graphic Design LLC (B).
(A) spends $3,000 on brochures with (B). (A) can write-off $3,000. Cool! But (B) have ta declare $3,000 income at the same time. So what’s the advantage of moving my money from one bank account to another?

posted at 02:39 pm on October 20, 2002 by Konstantin

12 Re: Bottom Line

First off, everyone read “Do your Homework” above. This is unfortunately a common occurance. Please contact proffesionals to handle setting up your company, even if you think you can do it. And if you already have set one up on your own, pay someone to look over all of your documents. Make sure your foundation is secure. With that said>>>

The advantage is the ability to zero out your taxable income, which to my knowledge, can only be done in conjunction with a corporation (or with just the use of one corporation).

The point of business is to make money. Lets say you profit after all expenses $110,000 for the year. Congradulations! You can now give a large chunk back because you are now in the highest tax bracket.

Now, the trick is to spend all of that money and get yourself into the lowest tax bracket (or a lower tax bracket) by spending the money on assets (things that make you more money). This can be done in many ways (401k’s for business owners, realestate, etc.) If your making enough to get out of the lowest tax bracket in one year, than the money getting you out of that bracket should be invested and written off. You invest in your other businesses, and those businesses send almost all of their income to that one corp. It’s something hard to grasp, but done everyday. Just look at any fortune 500 company and see how many smaller companies they own. I even heard Time Warner paid only something like $7,000 in taxes for one year (I don’t know if it’s true).

Having more than one company allows you to channel money more effectively to do this, and protects you legally in many ways.

Again, you really need to speek to a CPA (not just an accountant. Acountants count and that’s about it. They are usually poor themselves just like brokers). And have an attorney that is well rounded in your needs. The firm I use has a dept. for my real estate companies, Web company, Graphic Design company, and my personal Corporation which holds all of my companies. This structure was constructed by my CPA over many years in order to give me both legal coverage as well as financial leverage over tax laws.

Sorry If this isn’t the exact answer that you wanted, but to be honest,

posted at 11:01 pm on October 24, 2002 by Dave