FAQ – LLC Limited Liability Company – Should I Start a LLC?
Here is a class on LLCs.
The recording advises on choosing a Limited Liability Company (LLC) as a business structure, focusing on tax implications and liability protection. It explains that LLCs offer liability protection similar to corporations, shielding personal assets from business debts, but not from personal malpractice or tortious acts. The text details the tax treatment of single-member LLCs (treated as sole proprietorships by default) and multimember LLCs (treated as partnerships by default), emphasizing the simplicity of single-member LLC tax filing. Finally, it strongly discourages electing corporate tax treatment for LLCs, arguing that direct incorporation is simpler and avoids potential tax disadvantages, such as ineligibility for certain tax breaks associated with corporate stock.
The IRS website provides various resources and guidelines for the taxation of Limited Liability Companies (LLCs). Below are some relevant links that can help you understand how LLCs are taxed:
- LLC Taxation Overview:
- IRS Publication 3402: Taxation of Limited Liability Companies
This publication provides a general overview of how LLCs are taxed, including the default tax classifications and the options available for different types of LLCs.
- IRS Publication 3402: Taxation of Limited Liability Companies
- Forming an LLC:
- IRS Limited Liability Company (LLC)
This page explains the basics of forming an LLC and the tax implications of different business structures.
- IRS Limited Liability Company (LLC)
- LLC Tax Classification:
- Form 8832: Entity Classification Election
LLCs can choose how they want to be taxed by filing Form 8832. This form allows an LLC to be taxed as a corporation, partnership, or as part of the owner’s tax return (disregarded entity).
- Form 8832: Entity Classification Election
- LLC Tax Filing Requirements:
- IRS Guide to Business Structures
This guide provides information on the tax filing requirements for different business structures, including LLCs.
- IRS Guide to Business Structures
- Self-Employment Tax for LLC Members:
- IRS Self-Employment Tax
Members of an LLC may be subject to self-employment tax on their share of the LLC’s income. This page explains the self-employment tax and how it applies to LLC members.
- IRS Self-Employment Tax
- Estimated Taxes for LLCs:
- IRS Estimated Taxes
LLC members may need to pay estimated taxes throughout the year. This page provides information on how to calculate and pay estimated taxes.
- IRS Estimated Taxes
- LLC Tax Deductions:
- IRS Deducting Business Expenses
This page explains the types of business expenses that LLCs can deduct, including ordinary and necessary expenses for running the business.
- IRS Deducting Business Expenses
- LLC Tax Forms:
- IRS Forms and Instructions
This page provides access to various tax forms and instructions that may be relevant for LLCs, including Form 1065 (for partnerships), Form 1120 (for corporations), and Schedule C (for sole proprietorships).
- IRS Forms and Instructions
- LLC Tax Credits:
- IRS Tax Credits for Small Businesses
This page lists various tax credits that may be available to LLCs, such as the Small Business Health Care Tax Credit and the Work Opportunity Tax Credit.
- IRS Tax Credits for Small Businesses
- LLC Tax Help and Resources:
- IRS Small Business and Self-Employed Tax Center
This center provides a wealth of information and resources for small businesses, including LLCs, on various tax topics.
- IRS Small Business and Self-Employed Tax Center
These links should provide a comprehensive starting point for understanding the tax obligations and options for LLCs. Always consult with a tax professional or accountant to ensure compliance with IRS regulations and to make informed decisions about your LLC’s tax strategy.