Many forms of business entities exist, but all pay taxes although there is no way to avoid them, your decision upon choosing a business entity will have differing tax ramifications. The IRS will treats sole proprietorship’s, LLC’s and corporations differently when it comes to paying taxes on profits. If the LLC is a single member LLC, the payment of taxes is the same as for a sole owner where an LLC with multiple members will be taxed as a partnership.
Step 1
The first step is to determine the taxation status of the LLC. The best way to do this is by calling the IRS and asking them what type of taxation they have on record for the LLC. In simple terms if you are the only owner, you will treat the company taxes as if you were a sole proprietary business. If there are multiple owners, then the taxes on profits become the liability of the individual partners. The expenses and profits all divide between the partners based on the percentage of the business that they owned.
Step 2
Track all the relevant profit, costs and expenses on Form C for business income as if you were a sole owner. The Limited Liability Company is required to issue a Form K-1 which stipulates the percentage of income for the LLC that each member is required to report and pay taxes on. This percentage also applies to the costs and expenses of operating the business. Payment of taxes for an LLC is similar to the payment of taxes for an LLC is very similar to that of an S-Corporation in that the profits will flow through to the individual tax returns of the members in the case of the LLC or share holders for S-Corporations.
Step 3
You must submit your tax returns to the IRS by the deadline for the year in which the taxes are due. The tax forms for an LLC have the same filing date as a normal taxpayer or other self-employed taxpayer. File estimated taxes due with the return. There will be penalties and interest on the unpaid balance of tax due. You are allowed to call the IRS in order to make arrangements for a payment schedule.
Related posts:
