An LLC classified as corporation must also file a corporation income tax return. This is filed either in Form or Form S. An LLC may opt to change its classification. However, the LLC can only apply for the change 60 months after a previous classification change becomes effective. Also, classification changes have corresponding tax consequences. More details may be viewed in Publications and of the IRS. Do you have any issues about these LLC tax filing requirements?
Tell us your concerns and clarifications in the comments section below. You can elect to be taxed as a corporation or as a disregarded entity.
In order to be treated as a corporation, you will have to file IRS Form and elect to be taxed as such. Businesses with no employees and no excise tax liability need not obtain an EIN. In this case, the single-member uses his or her own personal social security number on the tax documents.
If you operate a multi-member LLC, it is automatically treated as a partnership, unless and until you elect to have it treated as a corporation for tax purposes. If you are unhappy with the way in which your LLC is being taxed, you can petition the IRS to be taxed in a different way.
As previously noted, as an LLC, you might elect to be taxed as a sole proprietorship , partnership, corporation, or as a disregarded entity.
The quarterly tax requirements for your LLC will depend on which business structure you elect to be taxed as. For example, S corporations can avoid having to make estimated quarterly tax payments, however, LLCs taxed as S corps still must pay the quarterly taxes. If you are an LLC that elects to be treated as a sole proprietorship for tax purposes, you will need to file Schedule C as part of your own personal tax return.
If a member spends more than hours on the business annually, then she is considered an active member. LLCs with multiple members can file as a partnership with Form or as a partnership with Form LLCs filed as a partnership do not pay taxes.
Instead, individual members show their portion of earnings on their individual tax returns. This comes into play when distributing profits between members. Members must pay taxes on this amount even if the LLC does not distribute all their money. Limited liability companies with multiple members must file Form However, they are not responsible for paying taxes on business earnings. If your LLC is designated as a corporation, it becomes its own separate entity with it a unique identification number.
The LLC will report all income and deductions on Form annually and pay the appropriate amount. One disadvantage of the corporate tax structure is double taxation. Income from the business is taxed at the corporate level. Then it is is taxed as income when the corporation makes distributions to its members.
Thus, the corporation structure is better if earnings will be kept within the LLC rather than regularly distributed. With a sole proprietorship, members are personally responsible for tax payments and filings.
When members of sole proprietorship LLC , file their personal income tax returns, they must include Schedule C. Schedule C includes all business related income and deductions and counts towards personal income tax. Single member LLCs are not reported separately. Multi member LLCs are reported separately and file their own tax returns. This amount contributes towards their personal income and is taxed individually.
LLCs who file as corporations are taxed at the corporate level.
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