How will my Single Member LLC be Taxed- Understanding how to pay my LLC's Taxes

A Limited Liability Company (LLC)  is an entity. A single-member limited liability corporation (SMLLC) is an LLC with one member. The IRS will treat SMLLC either as a corporation or as part of the owner's tax return (a "disregarded entity").

If a single-member LLC (SMLLC) does not elect to be treated as a corporation the LLC is automatically a disregarded entity  and the LLC 's activities would reflect on its owner's federal tax return.

Though LLCs are a legal structure, they aren’t recognized by the Internal Revenue Service for tax purposes. You’ll need to tell the IRS if you want your SMLLC to be taxed as a corporation by filing  Form 8832 with the IRS.

One of the best benefit to having your LLC be considered a disregarded entity is that your taxes will be much easier to process, there is no additional work or fees required on your part and you do not have to file two tax returns.

 When should you consider moving from a disregarded entity to an S-Corp?

You can start thinking about establishing an S-Corp once your business clears about $70,000 in annual profits after expenses from 1099 (not W-2) income, and can do so consistently. 

That’s because S-corps and multimember LLCs require extensive bookkeeping. Business owners will need to file two tax returns each year: that of the company and their own. They will also need to handle a payroll to ensure employees are paid and taxes are properly deducted. 

We would love to talk to you about your LLC, to help save you money, time, and legal complications.