The Tax Benefits of Incorporation to the Entertainer (Part 1)

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This is the second section of Anker Reed HSC’s blog series entitled “To Incorporate or Not to Incorporate? That is the Question” regarding the tax benefits of incorporation to the entertainer.

“In general, the tax benefits available to loan-out corporations compare favorably with those available to individuals under their two unincorporated alternatives:

  1. providing services as a direct employee of the unrelated party consuming the services
  2. providing services as a sole proprietor

“(La France, 1995)

The concepts employed to determine a corporation’s tax liability are the same broad principles of gross income, deductions, assignment of income, timing, and characterization of the income employed by the individual taxpayer. Taxable income is gross income less certain authorized deductions. Gross income is all income from whatever source derived. Internal Revenue Code § 61 provides a non-exclusive list of sources of income which qualify as gross income under that section, including compensation for services, gains derived from dealings in property interest, and dividends.

From gross income, deductions are made if specifically allowed by the Internal Revenue Code as properly deductible. Such deductions include those ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, deductions on interest paid during the taxable year and ordinary and necessary expenses paid or incurred during the taxable year for the production of income.

* For specific inquiries regarding a tax planning legal matter that you may have, you are welcome to visit our Los Angeles Tax Planning Attorney services page.

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To Incorporate or Not to Incorporate? THAT is the Question (Part 4)

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This is part 4 of Anker Reed HSC’s blog series entitled “To Incorporate or Not to Incorporate? That is the Question”.

“The desire to avoid employee classification, and to obtain the benefits of the corporate form and independent contractor status, often motivates workers to create an employee loan-out corporation.” (La France, 1995)

Primarily, though, an entertainer will be considering the formation of a business entity for the purpose of creating a more beneficial tax structure. By filtering income through a business entity and with proper Tax Planning advice, different tax advantages arise. Yet, the structures of a limited liability company (“LLC“) and a partnership will not provide the desired tax benefit to an entertainer.

A partnership includes a syndicate, group, pool, joint venture, or other unincorporated organization through or by means of which any business, financial operation, or venture is carried on, and which is not, within the meaning of this title, a corporation or a trust or estate.

* For specific inquiries regarding a business legal matter that you may have, you are welcome to visit our Business Organization and Business Formation legal services page.

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