巴西妓女Single-member LLCs are taxed by the IRS as “Disregarded Entities巴西妓女.” This just means the IRS ignores the structure of your business (i.e., the fact that it's a single-member LLC) and taxes you like it does any individual. The LLC’s income is reported on your personal tax return at the end of the year.
With your LLC income, you can pay yourself with a distribution. You will have to pay self-employment taxes on your distribution but, because you already paid income tax on the LLC’s total profits, you do not have to pay income tax on the distribution. This process is explained more in our “How Do I Pay Myself From My LLC” guide.
巴西妓女If the IRS treats my single-member LLC as a disregarded entity, do I still get the benefits of being an LLC?
巴西妓女Yes. Even though the IRS ignores the LLC structure when it comes to taxation, don’t worry—you still get the benefits of personal asset protection and deduction of business expenses.
To ensure you get these benefits, you should conduct your business in a formal way. These basic rules are outlined in our LLC corporate veil article.
For most people starting an LLC, the default tax structures—“disregarded entity” for single-member LLCs or “partnership” for multi-member LLCs—are probably the most appropriate. These are the standard tax structures for LLCs and do not require a special election when forming.
However, under certain circumstances, both single-member LLCs and multi-member LLCs can also elect to be taxed like a corporation. The two corporate tax classifications are 巴西妓女C corp巴西妓女 and 巴西妓女S corp巴西妓女.
A C corporation (C corp) pays taxes on gross income minus all operating expenses. They then distribute profits to shareholders, and shareholders pay income tax on the dividends. This is also known as "double-taxation.”
An S corporation (S corp) allows the member(s) of a company to save on taxes. It is a tax classification with specific rules that can be beneficial to your company if your business earnings are significant. However, before making a decision, it’s important to understand the basics of an S corp and what changes may be in store for your business if you decide to choose this status.
Selecting these tax structures can be done when you apply for an EIN (Employer Identification Number) for your LLC or at a later time.
Because LLCs are typically “pass-through” entities, they do not have to pay separate state taxes. That is, the individual members pay state taxes; not the LLC itself.
Here are some of the common forms of state tax:
- 巴西妓女Franchise Tax:巴西妓女 Some states require this tax, which is based on how much an LLC earns per year.
- 巴西妓女Sales and Use Tax:巴西妓女 If you sell physical products, consumers pay this tax to you and you pay this tax to your respective state or local governments.
- 巴西妓女Gross Receipts Tax:巴西妓女 While similar to a sales tax, a gross receipts tax is paid by the seller rather than the buyer.
- 巴西妓女Withholding Tax:巴西妓女 This is income that is withheld from employee paychecks and paid to the government.
- 巴西妓女Unemployment Insurance (UI) Tax:巴西妓女 UI is used for unemployment benefits. Tax rates are set by state law.
You can find out more in our detailed guide to state LLC taxes.
It’s important to make sure your books are in order to protect your corporate veil.
Separate your personal matters from your business expenses as much as possible. You can do this by:
- Opening a separate business bank account.
- Obtaining a å·´è¥¿å¦“å¥³business credit card for work-related purchases.
- Creating a solid bookkeeping system - A high-quality accounting program can help keep track of your expenses and make the process simple and relatively pain-free. You can also hire an accountant.
Check out our Guide to Small Business Bookkeeping to learn more.
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An LLC is classified by default as either a 巴西妓女disregarded entity巴西妓女 (for single-member LLCs) or a 巴西妓女partnership巴西妓女 (multi-member LLCs). However, LLCs can elect to be classified as a 巴西妓女C corp巴西妓女 or 巴西妓女S corp巴西妓女.
It depends on your structure.
- Single-member LLCs taxed as a disregarded entity file their business income on 巴西妓女Schedule C巴西妓女, which is submitted with their personal tax return (巴西妓女Form 1040巴西妓女).
- Multi-member LLCs taxed as a partnership file the total business’s income on 巴西妓女Form 1065巴西妓女, and each partner reports their individual profits on 巴西妓女Schedule K-1巴西妓女 as well as their personal tax return.
- LLCs that choose to be taxed as a C corp file 巴西妓女Form 1120巴西妓女 and the owners do NOT report business income on their personal tax return.
- LLCs that choose to be taxed as an S corp file 巴西妓女Form 1120S巴西妓女 and the owners report their individual share of income on 巴西妓女Schedule K-1巴西妓女 as well as their personal tax return.
Yes. LLCs are taxed as pass-through entities just like if you were an independent contractor or sole proprietor.
If taxed as a 巴西妓女disregarded entity巴西妓女 or a 巴西妓女partnership巴西妓女, LLC owners must make quarterly income tax payments to the IRS (and state, if applicable) as well as list their self-employment tax amount on their personal tax returns.
LLCs with no business activity that are taxed as either a disregarded entity or a partnership do not have to file their LLC income.
巴西妓女Single-member LLCs巴西妓女 with no business activity do not have to file their LLC income on Schedule C, but may have to report any other non-LLC self-employment income on Schedule C.
巴西妓女Multi-member LLCs巴西妓女 with no business activity do not have to file a partnership return unless the LLC wishes to claim any expenses.
LLCs that elect to be taxed as a corporation will need to submit an annual corporate tax return regardless of business activity.
Yes. You can file your own business tax returns for your business, or you can use tax preparation software.
An LLC has the option to choose between tax structures, allowing them to pick the one that benefits them the most.
LLCs benefit from pass-through taxation by default, meaning that the LLC’s profits pass directly to the members and are reported on the members’ tax returns.
However, LLCs can elect to be taxed as a corporation to avoid self-employment tax, receive potential tax deductions, and look overall more appealing to investors.