Option 2: LLC or Limited Liability Corporation

By John Hazard  |  Print this article Print

Many VAR and reseller businesses start with an individual providing IT services to clients and getting paid and cashing a check. But just how that individual cashes the check will determine how much of the money he gets to keep come April 15. Here's a look at the best tax structures for VAR businesses.

2. LLC or Limited Liability Corporation

Often considered the best option for small business owners, this doesn’t offer all the advantages and tax deferrals of a corporation, but it is simpler and cheaper.

Like a DBA, the revenue of the LLC flows as income directly to the business owners(s) personal 1040, and the business owners still pays the 15-percent self-employment tax, but the LLC separates the person from the business.

It also allows you to put certain assets in the ownership of the business, making it less likely you would be audited.

Significantly, an LLC also offers an extra layer of protection from law suits and audits. Many business owners like the LLC option because it the filing rules are the same as personal income taxes and there are no quarterly reporting requirements like those of a corporation.