Within the first 90 days (??) of forming the LLC you should (if your tax advisor agrees) file a form 2553 (DETAILS) and select to be treated as a subchapter-S corporation for Federal tax purposes. This election would cause all the profits to roll down into the owners (could be multiple owners) personal tax returns. If you have multiple owners you could choose to file a proprietorship federal return and allocate specific monies (profits or losses) to each individual shareholder via a Schedule K-1.... It sounds more difficult than it is.... If your business is relatively uncomplicated (no subsidiaries, not taking any fancy credits for weird stuff like solar power, etc), H&R Block TaxCut or Quicken have business tax software you could use for less than $100/year, vs an accountant at >10x that fee.JALLEN wrote:The LLC prepares and files information returns with IRS, I believe. No taxes as the tax is paid by the owners personally on their returns. As far as formalities go, there is the operating agreement, even in a single member LLC, the need to keep separate bank accounts, books, etc, and don't fudge on this. Of course, in CA, the LLC has to pay state income taxes, minimum $800 a year whether you made any money or not, or even did any business. Thankfully Texas doesn't have that dampening requirement.wgoforth wrote:There is no state tax if the service is instruction only, as in the case of CHL instructors. I'm not an expert either, but as I searched all material I read stated the LLC is the simplest tax wise, as it passes through to your personal returns. Can any one can clarify this?The Annoyed Man wrote:There is reporting necessary to the state.......I forget if it's the Sec State office, or the Franchise tax board. Also, LLC places a greater requirement to not commingle funds......at least this is what I have been advised. But understand, I'm not an expert. I'm only telling you what my experience has been, and what advice I was given. I have to rely on the wisdom of others in this area.wgoforth wrote:My understanding was the LLC did not change tax reporting as it is pass through to your personal taxes. Have you found this otherwise?The Annoyed Man wrote:I eventually converted from a sole prop to an LLC on the advice of my CPA, with one real goal in mind.....making my exit strategy cleaner whenever I decide to really retire. Having the LLC behind the name makes the business easier to sell/transfer ownership, according to what he told me. The downside is that my tax picture has been more complicated....not so much from amount paid, but in the reporting requirements. Given that my business does not have that much value in terms of capital assets, size of bank accounts, or the size of my customer base, and given that neither my wife nor son have much interest in owning this business if I shuffle off this mortal coil, I am rethinking whether or not the change was worth it.
If you can do your own taxes, you can do your own business taxes, IMO. You might need some help the first time, but, it's not that complicated.