LLCs can deduct operating and travel expenses, among others.
A limited liability corporation (LLC) is a very flexible entity that can be used to form a partnership or even start a sole proprietorship. It is known to have limited liability because actions taken against the business owner are absorbed by the company itself, not the owner, providing significant protect against lawsuits.
Tax Write-Offs
Tax write-offs are expenses or donations that business owners do not need to be taxed on. The Internal Revenue Service (IRS) imposes limits on how much can be written off of particular items, and how write-offs proceed from year to year, especially in the case of assets that have costs spread out over years. There are a large number of rules governing write-offs, and they change continually. For instance, in 2008 the IRS gave businesses the ability to write off environmentally friendly assets, but this lasted only a couple years.
Operation
One of the most common tax write-offs occurs in business operation expenses. These expenses include all overhead costs involved in keeping the business running and making necessary transactions. Software programs are a common write-off for many businesses. Others may write off money used to clean business spaces, salaries, traveling expenses and many other common expenses involved in day-to-day activity.
Travel
Travel expenses are written off by most LLCs. This refers not only to stipends for traveling long distances, but also for vehicles used by the business. The business does not have to use these vehicles: vehicles and gas that are used for business expenses can be deducted, in part, from LLC taxes, depending on how frequently they were used. Auto insurance and upkeep can also be deducted.
Space
If the business has a space in which it operates, the costs associated with this space can also be deducted. If the business leases an office, the rent can is tax free. If a space inside a home is used solely as a business office, expenses for that space can be deducted from taxes.
Laugh Test
With so many deductions possible in so many different areas, small business owners are often eager to put down whatever expenses they can to save money on taxes. Sometimes these deductions are contested, especially if they do not seem reasonable. A common rule of thumb is the laugh test: if the deduction is absurd enough to make the LLC owner laugh or another investigator laugh, it will not be relevant enough.
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