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Currently my situation is (I'm 18 this is my first year that I'm going to need to deal with taxes) that based off what I've already made so far this year I'm assuming I will make around $50,000 by the end of the year through one of my online businesses.

The problem with that is now I need to pay Self Employment Taxes (around $7,065) on top of Income Taxes (around $12,008), based off what I've heard registering an LLC and putting my income in there has some tax benefits.

So now my question is, based off what I've already made (before registering the LLC) will I be able to transfer my current income into the LLC before the end of the year so I can get the benefits of having the money in an LLC?

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    Simply having an LLC is not a quick fix for reducing your self-employment taxes. You need to talk to an accountant so that you don't mess this up and add penalties to your tax bill. – Ben Miller Nov 3 '17 at 14:51
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    And congrats, it sounds like you are doing well with your business. :) – Ben Miller Nov 3 '17 at 14:53
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    Second both of Ben's comments. Very well done, and hopefully it continues to grow. If it does, you will certainly need an accountant. Having a trusted team of advisers will help you in this life. Concentrate on building your business and they will help you with the taxes and organization. – Pete B. Nov 3 '17 at 15:13
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An LLC is a very flexible company when it comes to taxation. You have three basic tax options:

  • LLC taxed as sole proprietorship -- This is very easy to do, but you will be taxed the same as if you don't create an LLC. If your only concerns are taxes, this won't help you.
  • LLC taxed as S-Corp -- There are ways to reduce your tax burden if you choose to have your LLC taxed as an S-Corp. You basically have to pay yourself a reasonable salary and profits above that salary can paid to you as dividends which are taxed at a lower rate. While this can give you tax savings, you need to be careful to comply with various state laws and IRS requirements so you need legal and/or accounting advice. Some good info here. I don't know if you could "transfer" existing income to your LLC to reduce taxes, but given the complexity of doing this, I suggest you hold off on doing this until next year.
  • LLC taxed as C-Corp -- This is even more complicated than an S-Corp and probably does not give you additional tax benefits.

There are other good reasons to create an LLC (mainly to protect your personal assets) so even if you decide that you don't want to deal with the complications of an S-Corp LLC, you should still consider creating a sole proprietorship LLC.

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  • A C-Corp is allowed to retain earnings. This avoids personal income tax entirely and allows the corporation to spend the money on investment in the future. That's certainly a tax benefit if you plan to invest money from the C-Corp at some future time. But it's utterly useless if you don't, as you have to pay corporate tax and individual tax. You still get to avoid payroll taxes (it's not a lower rate--it's avoiding a tax entirely). Of course, you also lose out on eventual benefits if you avoid the social security tax. – Brythan Nov 4 '17 at 18:16
  • But this doesn't seem to answer the question asked, which is if the asker can retroactively put income in the LLC that was earned prior to the creation of the LLC? – Brythan Nov 4 '17 at 18:17

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