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Best way to file Fed Income tax for my LLC?
Until July, 2010, I ran my business as a sole proprietorship and filed federal income taxes on my personal tax return. In July 2010, I closed my sole proprietorship and opened a single-owner LLC. The LLC has its own FEIN (but no employees) and for liability reasons, I want to file the LLC's taxes separate from my personal taxes. How do I report income from the LLC and my personal income taxes (because I do have other sources of income) without being double taxed???
3 Answers
- Anonymous1 decade agoFavorite Answer
From the IRS standpoint a single member LLC operates and files taxes identically to a sole proprietor. You will still be filing a Schedule C and SE with your 1040 and still pay self employment tax. All you've essentially done by forming the LLC is possibly incur additional state taxes. How do you figure you'd be double taxed?
- 1 decade ago
The limited liability your LLC provides will not be extinguished just because you combine your own personal income with the income from the LLC. Because you are a single-member LLC, the company is a "disregarded entity" for IRS tax purposes. This means that the IRS does not regard your LLC as a separate, taxable entity. As a result, you must claim all of your LLC earnings on your own Schedule C (just as you did when you were a sole proprietorship).
Double taxation only applies in the corporate context. C-Corporations are taxed on corporate income and then the money is again taxed when distributed as dividends to shareholders. This does not apply to LLCs unless they have elected to be taxed like C-Corporations.
- troLv 71 decade ago
if you don't want to continue the sole proprietorship, file Corp. on form 1120
and even tho this entity is a stand alone, it is apparently your money, being a sole participant
it will be taxed on its profits