How will my LLC business be taxed?
How will my LLC business be taxed?
The 2021 tax season looks a little different.The IRS extended Federal income tax filing deadline Due to the COVID-19 pandemic, from April 15, 2021 to May 17, 2021. This extension of tax returns provides taxpayers with some extra time to file their tax returns.
With the exception of the federal income tax deferral, all other deadlines for filing small business taxes appear to be completed as scheduled this year. Of course, the types of taxes paid by small business owners will vary according to their physical form.
Let’s take a look at what a small business tax for a limited liability company (LLC) might look like. What taxes can a limited liability company expect to pay, and what upcoming deadlines need to be aware of in the second quarter and beyond?
Limited liability company and “pass-through” tax treatment
There are several advantages to forming a limited liability company. A limited liability company provides limited liability to its owners. In the event of unforeseen circumstances, this can separate and protect the personal assets belonging to the business owner. In addition, as a consolidated company, you may be able to build credibility among customers more quickly.
A limited liability company is a so-called “through” entity. This means that the profits of the business are passed on to the owner (Also known as member). Members of a limited liability company report profits and losses on their personal tax returns, not at the business level. The flexibility of the delivery entity ensures that the limited liability company can legally avoid double taxation. A limited liability company is only taxed once at the individual level, rather than taxed twice under different entities such as a C company.
Limited liability company and entity classification election
It is important to note that although LLC is a transit entity, it may be Treated as a partnership By the Internal Revenue Service. This is the entity’s default federal tax classification. For example, a single-member limited liability company may also be considered a sole proprietorship by the IRS.
However, this does not mean that a limited liability company can be taxed as a partnership or sole proprietorship. The entity must explain how it wants to classify federal income tax.In order to develop this specification, LLC must submit Form 8832This allows the LLC to choose to be classified as an association that is taxable as a specific entity, such as an S corporation.
S company tax election
Usually, many small business owners choose to tax their limited liability company as an S corporation.
Why did you choose this status and what impact does S Corp have on small business taxes? S company too Delivery entity. The income is passed on to the individual level to avoid double taxation.
However, a limited liability company faces qualification requirements before becoming an S company. Companies must be able to meet certain ownership and stock standards. Some examples include that the company may have no more than 100 shareholders, the shareholders are all personal roles, and the company has only a single class of stocks.
Now you have understood the limited liability company as a delivery entity, how to choose different tax classifications, and why S company is the preferred tax option. Let’s review some of the taxes that LLC needs to submit and the suggested forms required for these submissions.
Small business tax in the second quarter (and beyond)
For small businesses, the tax season is not limited to one day each year.Don’t just focus on federal and state income Tax period. Consider these additional small business taxes and payments for the second quarter and beyond.
- Income tax. Keep in mind that the fees that the LLC pays ultimately depend on how it chooses to tax the IRS. Otherwise, the limited liability company pays income tax through its default federal tax classification.
- Estimated tax. This applies to sole proprietors, S Corporation shareholders, and self-employed individuals who owe taxes of $1,000 or more. These taxes are paid through estimated taxes. Usually, these payments are made four times throughout the year. The deadlines for the remaining quarters of 2021 are April 15, June 15, September 15, and January 18, 2022.use Form 1040-ES To determine your estimated tax.
- Self-employment tax. The tax is paid by self-employed workers. It acts as social security and medical insurance tax.
- Employment tax. Companies with employees will withhold payroll taxes to fund social security and medical insurance. Employers also withhold FICA taxes, federal income, and federal unemployment (FUTA) taxes from employee salaries. FICA tax can be used Form 941.
Do you have more tax questions?
Do you think you might miss any small business tax credits or deductions? Is your small business taking advantage of COVID-19 resources, and you have questions about how this might affect the filing of small business taxes?
Although I cannot personally provide tax advice, I do recommend that you obtain appropriate tax assistance. Contact a trusted tax professional.Look for The right tax expert For your business, it may include a certified public accountant, bookkeeper or accountant.
Some of the topics you discuss may include the following:
- Ask questions about tax credits and deductions for potential tax refunds that you may be entitled to.
- Check out tools that can help you better arrange tax documents and deadlines.
- See what business records you should keep and why it is best to keep these files.
- Talk about your limited liability company. If you are not sure whether you should choose S Corp for filing or have any other business-related issues, tax experts will be able to provide you with guidance.
You can also work with tax professionals to plan ahead for the upcoming business quarter. Check for upcoming additional tax deadlines. Let your tax experts help your business throughout the year.
The sooner you meet with professionals before the May 17, 2021 deadline, the more you can rest assured that you can file your taxes correctly, and can confidently deal with the upcoming tax deadlines and organize carefully.
Fundbox and its affiliates do not provide tax, legal or accounting advice. This material is for reference only and is not intended to be provided and should not be used as a basis for tax, legal or accounting advice. Before conducting any transaction, you should consult your tax, legal and accounting advisors.
Deborah Sweeney is the CEO MyCorporation.com It provides online legal filing services for entrepreneurs and enterprises, including startup bundles including company and limited liability company formation, registration agency services, DBA, and trademark and copyright filing services.You can find MyCorporation on Twitter at @MyCorporation.