LLC or S Corp. What’s Better for My Business?

LLC or S Corp. What’s Better for My Business?

Many business owners are usually faced with deciding whether to incorporate as a Limited Liability Company (LLC) or S Corporation (S Corp) due to the nature of their business, ownership, employees etc. It’s advisable to contact an accountant to help you with making the right choice depending on your organization’s situation. We however have a few pointers here to help you understand how they both work to help you make an informed decision.

Protections

LLC and S Corporations both have limited liability protections for their owners. Owning a business as a sole proprietor gives an opportunity for business creditors to reach your personal assets that do not have anything to do with your business. As an LLC or S Corporation, your business is a separate entity, responsible for its debts, liabilities and obligations.  

Pass-Through Taxation

S Corps and LLC’s both offer their owners pass-through taxation with federal income taxes. This means the income and losses of the business are not taxed at the company level, but passed through to the owners to be reported on their individual tax returns. This avoids “double taxation” which is typical for C Corporations, since the corporations and shareholders are taxed at the company level.

LLC Advantages

There’s some additional flexibility when it comes to managing an LLC. S Corps and C Corps have corporation laws that have more guidelines regarding the management of the company compared to LLC’s. LLC’s have more flexibility to split and allocate financial interests among its members, S Corp’s profits however must usually be allocated based on ownership percentage. S Corporations can only have certain types of shareholders and are usually restricted to having less than 100 shareholders. Violating these rules can lead to many unwanted issues.

LLC’s can however achieve pass-through taxation status without those restrictions and offer more income tax choices in how your company is taxed. There’s an option to have your LLC taxed as a C Corp or S Corp, but we’d recommend discussing with your accountant. 

S Corp Advantages

S Corporations offer the options to receive both salary and dividend, which could keep your taxes lower. LLC owners however pay self employment taxes, which can result in higher taxes. S Corps are also easy to convert into C Corps, with the process simply involving the filling of a form with the IRS. LLC’s on the other hand have a more complex process to convert into C Corp. S Corps typically also get outside funding more than LLC’s, as some investors and banks prefer to invest in corporations over LLC’s.

Summary

LLC’s and S Corporations both have their advantages, you may prefer to have more flexibility in running the company and allocating profits as you wish, which would lead to you to incorporate as a LLC. Contrarily, you might want earnings distributed proportionately to members, prefer to earn a salary instead of self-employment income and plan to seek funding later on. This would lead you to incorporate as an S Corporation. 

The best way to determine what best suits you is to talk to an accountant like one of our professionals at Motl Accounting

Tips to help with your taxes in 2021

Tips to help with your taxes in 2021

Prepare to file your taxes in 2021 with these in mind!

Many businesses and families went through unexpected changes in 2020. The effects of the pandemic upended financial plans, forecasts, family plans, business goals and much more. This undoubtedly will have an impact when filing your 2020 taxes due to changes in the tax code for 2021. With COVID-19 came stimulus checks, programs like the Paycheck Protection Program (PPP), Pandemic Unemployment Assistance (PUA) and more depending on your business or personal need. We’ve been assisting businesses and families with their accounting and tax needs through the pandemic and will provide you with some tips to prepare you for filing your taxes this year. 

Organize Records and Documents 

For many, the main hurdle is getting documentation together. It’s important to have all your documentation in order to have a seamless filing experience. Keep all the tax documents that start coming in the mail early January in a folder and do not throw out any tax document that may look irrelevant. Many tax documents can also be downloaded online depending on the provider of the documents in case you can’t locate them. For example, many financial institutions provide tax documentation that can be viewed and downloaded when you access your account. 

Review and Itemize Transactions for your Business

Whether you are self-employed, have a side business or own a home, you’ll need to ensure your transactions are correctly documented to claim certain deductions. The pandemic led to many working from home and you may be entitled to write-offs as a result. If you use a software like QuickBooks or use a spreadsheet for your records, take the time to review the transactions and put them in their respective categories. This will help your tax preparation process greatly. The benefits of having an accountant who assists with monthly bookkeeping is advantageous, as the monthly management of your books throughout the year keeps your transactions correctly labeled. This prepares you better for tax season and makes things easier for you and whoever is assisting with filing your taxes.

Note Life-Changing Events

Many life-changing events happen year over year, but have been commonly happening since the beginning of the pandemic. Changes like getting married, getting a divorce, a death in the family or retirement may qualify you for tax breaks. Your accountant or tax preparer should be aware of any life-changing event so they can help determine which tax breaks you qualify for based on how your circumstances changed in 2020. 

Here are a few things to consider to help prepare for filing your 2020 taxes. Having an experienced tax preparation service can be helpful due to the changes in the tax code. Finding the right tax forms or knowing what to fill out due to the changes caused by the pandemic can be confusing. It’s advisable in these uncertain times to consult with an experienced accountant or CPA to ensure you are getting the most out of your taxes, while being compliant under the current laws. 
Motl Accounting can handle the most complex returns providing you the peace of mind you would want through the experience. If you are looking to prepare your taxes, you can talk to a tax professional at our West Dundee location to get your questions answered and your taxes filed properly.
Contact us at 847-426-2100 or send us message via our Facebook Page to get started today.

Bookkeeping Tips for a Growing Business

Bookkeeping Tips for a Growing Business

You had a passion to start a business and provide services or products to many customers and fortunately, you are finally there! Your efforts are making your business grow quickly and you are realizing how busy you are becoming to not have time for all the things you used to. One of those could be your bookkeeping and financials. There are more moving parts to a fast growing business and having great financials to help you run and manage the business successfully is of great importance. Great bookkeeping is vital to measuring and understanding your business, so you can manage it as it grows or have the right records for potential investors or lenders. It ultimately helps you monitor your cash flow and make wise business decisions while staying compliant. Here are a few reasons to consider keeping up to date with your bookkeeping if your business is experiencing rapid growth. 

Cash Flow Management

Keeping up with your bookkeeping daily and weekly lets you know how your cash flow is so you can better manage your business operations. Knowing how much is needed to keep the operation going versus what’s currently on hand gives you the opportunity to make smart and quick decisions. With growth comes the possibility for many financial surprises and opportunities and not understanding your cash flow can lead to stressful times for a business owner.

Operations Management

Well organized books let you know where your profits and losses are coming from. By analyzing your books, you’ll have a bird’s-eye view on what’s working or not operationally before it’s too late. This gives you the opportunity to know where to invest in more or where to cut or reduce cost, production or service. This means your accounting books provide opportunities for you to continuously take your business to the next level. 

Business Funding

Many business owners come to realize they need capital at a moments notice and keeping up to date with bookkeeping can be very beneficial in this instance. Cleaning up several months of your books at once can lead to errors, wrong data and be time consuming. Investors and lenders typically ask for information on your books and mostly assist those who have clean books and a good idea on how they spend and receive money.  There are additional reasons as to why daily and weekly monitoring the financials of a fast growing business is important. When to consider an accountant that can help as your business grows is an important yet sometimes daunting decision. We have helped several clients with making the right decisions to grow their business at Motl Accounting. Our accounting practices provide you the information you need to make sound business decisions during the course of your rapid growth. We have accountants, dedicated bookkeepers and payroll specialists on staff to help our clients. We pride ourselves in providing peace of mind accounting practices so our clients can focus on other important demands of growing their business.  Is your business experiencing rapid growth? Contact us at our West Dundee, IL location at 847-426-2100 or via our website. We’d be pleased to let you know how we can assist your business during the fast growing phase and also how we can help you grow
Easy Ways to Grow Your Retirement Savings: Smart Retirement Planning

Easy Ways to Grow Your Retirement Savings: Smart Retirement Planning

Retirement often feels like the finish line of a marathon. No matter how far away your last day of work may seem, it’s a goal worthy of pursuit. Creating a retirement savings plan is akin to staying hydrated during a long distance race, otherwise known as your career. It’s a necessary task to ensure you’ll have enough left in the tank (or bank account) when it’s time to settle down.

For retirement, you get what you put in; learn about some of the preparations you can make today to maximize your reward down the road.

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3 Reasons Bookkeeping Services for Small Businesses Yield Great Results

3 Reasons Bookkeeping Services for Small Businesses Yield Great Results

Business owners are typically jacks-of-all-trades, and in a competitive market, a versatile skillset is a key ingredient of success. Unfortunately, this means that some entrepreneurs end up stretching themselves too thin with responsibilities.

When one person is in charge of bookkeeping, marketing, and business growth, something’s got to give to ensure quality production and error-free work. Bookkeeping is an important responsibility no matter what industry you’re in, and it should always be a priority to complete it accurately and efficiently. Motl Accounting in East Dundee has a team of bookkeeping specialists to help Chicagoland’s small business community improve their company’s daily operations.

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3 Questions to Ask Your Payroll Provider

3 Questions to Ask Your Payroll Provider

If you’re a small business owner in Chicago or the northwest suburbs that have been considering using outsourced payroll services for your company, you’re sure to have plenty of questions that the Payroll Vault team at Motl Accounting in Dundee can answer. After all, payroll is an essential responsibility for every company, so it’s important to know that yours is in good hands. Still, the benefits of enlisting an external payroll provider often outweigh this uncertainty for small and medium-sized businesses. When it’s time to dedicate more time to grow your business and less on number crunching, here are three questions you should always ask when evaluating payroll providers.

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