California LLC setup for expenses?

3 Replies

Hi All,

I've been pondering about this so I thought I query the forum.

I'm a newbie investor and so far I have not purchased a property yet. However, I've been looking, researching, etc.

I'm wondering if it's feasible to set up a LLC so I can deduct some of the expenses associated with "the business"? I know there's no way around California LLC (for income) unless I move out of the state. However, is it logical to think this way...that is, if I setup a California LLC, which costs about $800 a year, and if I have yearly expense of $800 or more that I can deduct (from subscriptions, conferences, traveling to see a property, etc.), then it's worth it? Down the road, when I do move out of the California, I can move the LLC or set up elsewhere?

Thanks in advance for your comments and feedback.

Ted

@Ted Sung it's a great question. First, I recommend you speak with an accountant on the matter. Generally, it won't save you money until you are exceeding a certain amount of income, somewhere around 100k a year. This is why I recommend you speak to your accountant. I would also inquire as to a list of deductions. You should be tracking your expenses and mileage regardless. A quick tip on this, log each travel expense location in your calendar with address every time. Then you can go back later and document in a spreadsheet. LLC's are typically for asset protection. I personally prefer S-Corps for what you are describing of personal income and business. I'm not an attorney, so please consult with one. Hope this helps.

I second what Dennis wrote. LLC will not provide you any tax advantage. You can still deduct business expenses as a Sole Proprietor. The savings is when you are making over a certain amount of money and split the revenue and save a little off the self-employment tax portion. That's structuring it through an S-Corp. LLC entity gives you limited liability protection and your tax savings will come in how you elect to be taxed. Please talk to a CPA. Good Luck!

@Ted Sung

You likely want to work with a CPA that you can ask questions throughout the year. This will allow you to avoid doing things that are not required.

You are eligible the same write-off's regardless if you have an entity or not.
Thus, you can write off items such as subscriptions, conferences, traveling with or without an LLC. The thing that you need to have is a business. You can't write off those items until you have a business(AKA have a property).