Single and Multi Owner LLC Taxes
by Dennis
Gardner
LLC owners must report their business income and
losses on their personal income tax returns
Similar to a sole proprietorship or partnership you
must report your income to the IRS. An LLC is not a separate tax entity like a
corporation. The IRS considers Limited Liability Company a pass through
entity." Earnings are taxed only once. Profits and losses of the LLC pass
through the business to the LLC owners. Owners (members) must then report this
information on their personal tax returns. The good news is the LLC itself does
not pay federal income taxes. But some states do charge LLCs an annual state
tax.
Income taxes and the number of members in your
LLC
The number of members in your limited liability
company determines how it is taxed by the IRS.
Single-Owner Limited Liability Company
Taxes:
If you are the sole owner of your LLC then the IRS
taxes you much the same as it would a sole proprietorship. All profits and
losses must be reported on your 1040 tax return (on the Schedule C attachment).
You can not avoid taxes by leaving your money in the LLCs bank account. All
profits in the LLCs accounts must be reported.
Multi-owner Limited Liability Company
Taxes:
If there is more than one member of your LLC the IRS
taxes you much the same as it would a partnership. Again the LLC itself does
not pay tax on profits. Individual members must report their share of profits
on Schedule E and attach it to their 1040 form. Each member pays taxes on their
distributive share of company profits, as stated in the LLC operating
agreement. Again, the LLC itself is not taxed by the IRS although there may be
an annual state tax, depending on which state you are in.
State Taxation of Limited Liability
Companies:
Although the IRS does not tax LLCs, California
levies an annual minimun franchise tax of $800.00, they expect this payment
within three months of forming your LLC and kindly send you a bill so you dont
forget. Wyoming levies an annual State tax on of $100.00; California requires
an annual List of Officers or Members filing, fee of $100.00; Delaware levies
an annual franchise tax of $30.00.
About the Author: Dennis Gardener is an
assistant editor at small-business-assistance.
More small business
information YOU CAN USE, available at
small-business-assistance
