What Are the Tax Benefits of an LLC Business?


Quick Answer

Tax benefits of an LLC include pass-through taxation, which avoids double taxation of corporate profits, a choice on how to be taxed, and deduction of business expenses, according to the Houston Chronicle. Profits for LLCs are generally reported on each member's personal tax return and are subject to self-employment tax.

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An LLC can elect to be taxed as a corporation, which then avoids the self-employment tax by treating profit distributions to members as dividends, but this can have repercussions, according to the Houston Chronicle.

Deductible business expenses include auto expenses using either the actual expense method or the standard mileage rate method; costs of doing business such as advertising, office supplies, utilities and repairs; capital expenses in order to get a business started; business books, legal and professional fees; business entertaining; travel expenses; and interest charged for business purchases, according to NOLO. The majority of these expenses are 100 percent deductible; however, there are special rules pertaining to capital expenses, business entertaining and travel expenses.

A home office deduction is also available for LLCs that operate from a home office. This deduction is based on the percentage of a home that is used to conduct business and applied against home expenses, according to the Houston Chronicle. LLCs, in addition to having tax benefits, also protect their members against personal liability for actions or business decisions of the LLC, according to the Small Business Administration.

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