I have a full-time JOB and a side LLC for consulting. Can I invest the net income of my LLC consulting to stock or other businesses and deduct the income?

[Anonymous_]

Exactly what are you trying to accomplish? You cannot deduct income.

[Critter-3]

What you do with the taxable profits from the business is immaterial.  You cannot "bury" them into other things to avoid taxes ... that is frowned upon. 

[VolvoGirl · Accepted solution]

Is the LLC a Single Member LLC that you are reporting on Schedule C in your personal return?  Or is it an S corp?  You can invest or do whatever you want with the Net Profit.  But that won't  reduce the Net Profit on Schedule C.   You can only deduct actual business expenses.  You have to pay self employment tax on the net income in addition to your regular income tax on it.  Sorry.

[alikhod83]

Lots of companies reinvest the income of the business into another investment to expand their business like if you have one store, you would buy another store and use the second store purchase against your net profit. I was wondering if the business owner could invest in another business to expand the business... let's say an store owner purchases a rental property under the same business name

[Anonymous_]

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@alikhod83 wrote:

..let's say an store owner purchases a rental property under the same business name

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There would be absolutely nothing wrong with doing so, but the store owner could not deduct the entire purchase price of the rental property from current store income (although, depreciation deductions could be taken for the cost basis of the rental property).

[alikhod83]

Thank you for your response! Let me clear it up, let's say my LLC has around 60K net income after deducting routine expenses. If I use the 60K as down pay meant to buy the office, Shall I pay tax for the 60K or its account as an expense? The point is lots of real estate companies invest their profit in another property as a 1031 exchange. I don't know if a similar opportunity exists for another type of business. I have sole ownership engineering consultant LLC

Thank you

[Anonymous_]

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@alikhod83 wrote:

I don't know if a similar opportunity exists for another type of business.

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After tax reform (the TCJA), Section 1031 now applies only to exchanges of real property and not to exchanges of personal or intangible property.

See https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-ti...