Limited liability company owners in New Hampshire are not taking last year’s tax expansion lightly. For months now, the LLC community has rallied against the tax laws; they are angry because the laws – not around when the entrepreneurs underwent business incorporation – takes away some of the advantages that led them to strategically incorporate as limited liability firms.
The Nashua Telegraph explains that many other business types in the state are allowed are allowed to pay executives whatever the owners decide is appropriate, while LLCs have always been prohibited from this flexible practice. Other business types pay no income tax on their earnings, and instead the companies pay a tax.
LLCs, on the other hand, have heretofore been required to pay certain executives, but they always benefited from the ability to claim compensations to avoid profit taxes. Now, the tax change is changing the parameters of “reasonable compensation” which means LLCs will pay more.
Local business owners are trying to push a case that will take legislators in front of a federal judge – they believe state officials should not be able to change what is a federal model for LLC owners.
Entrepreneurs might take this as an example to know about the tax benefits of all business types before they incorporate their companies. Knowing about the rights affiliated with different incorporations might be critical to future tax savings.