After much consideration, you’ve decided the best form of ownership for your business is a limited liability company (LLC), which offers limited protection from creditors along with managerial flexibility.
Now you may be wondering what tax return you’ll file at year-end.
You might be surprised to learn there’s no federal income tax form specifically titled “Limited Liability Company.”
Why? Because LLCs are ignored for federal income tax purposes.
That doesn’t mean the IRS will ignore your income. It does mean you can choose how to classify your company, by filling out Form 8832, “Entity Classification Election.” The classification you pick determines what tax returns your business will use.
For example, if you’re the only member of your LLC, you have the option of treating your business as a sole proprietorship or a corporation. Elect to be taxed as a sole proprietor and you’ll report the business’s tax information on your personal income tax return. Treat your business as a corporation and you’ll file a corporate income tax return.
What if more than one person owns part of the business? In that case, you can choose to have your LLC taxed as a partnership or a corporation. Either choice requires a separate tax return.
Other tax forms your business may have to file include payroll returns and information statements such as Forms 1099. For assistance with any of your filing requirements, call our office.
