Tax Guru-Ker$tetter Letter
Tuesday, March 06, 2001
Look Before You Leap
I guess I really shoudn't be surprised at the number of stupid people in this country. However, it never ceases to amaze me how often people will set their businesses up as an LLC or an S corporation without the foggiest idea of what the heck they are doing. Practically every single day on the tax question boards on such sites as AskMe.com, someone is bragging that s/he has an LLC or an S corp and wants to know how the taxes are handled. They are shocked to learn for the first time about some of the pitfalls inherent in the format they selected. I can't resist saying something as direct as "this should have been reviewed before you chose that format. It's a bit late to think about the tax consequences now."
For those of you who have the good sense to research the tax aspects of different business formats before starting out, check out this comparison. There is no such thing as a one size fits all; but I've lost track of the number of occasions I have heard of where a business owner cut his/her own throat by using an LLC or S-corp instead of a C corp.
This is another reason why I distrust the IRS & media claims of the "tax gap" in this country. Rather than underpaying taxes, most people are overpaying because of idiotic moves like this.