How to File Business Taxes for an LLC

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Limited Liability Companies (LLCs) can have different taxation benefits, especially those that were set up in Nevada. However, this doesn’t exempt them from other forms of taxation. The Internal Revenue Service (IRS) will treat a limited liability company as part of the owner’s tax return, partnership, or corporation. This will depend on how many members the company has and the number of tax elections made by the company.

How to determine tax classification?

Since the IRS does not automatically consider LLCs as corporations, the members need to elect their entity classification. The LLC must file Form 8832, Entity Classification Election as a corporation or Form 2553, Election by Small Business Corporation as an S corporation, to inform the IRS how it wants the company to be classified for tax purposes. The company may choose among the following:

  • Part of owner’s tax return (disregarded entity)
  • Corporation
  • Partnership

The form contains updated mailing lists for each state, and it has general instructions on the last four pages. Take note that the LLC should file Form 8832 or Form 2553 within 75 days of the formation of the company. The IRS allows for filing within the first 75 days of each fiscal year if the company fails to comply with the original period. Alternatively, the IRS provides rules for late filing if the LLC exceeds 75 days.

The IRS will send a determination letter within 60 days to inform the LLC of its decision. Owners can call 1-800-829-0115 if they have yet to receive the letter within the said time frame.

How to file business taxes for LLC?

LLCs have a more flexible tax status compared to sole proprietorships. This is why the IRS can tax LLCs as pass-through entities or consider them as C or S corporations for tax purposes. Take note that setting up an LLC in Nevada, for example, doesn’t exempt business owners from paying taxes and other fees in other states. Even if they have an LLC established in Nevada, their corporations still need to comply with the taxation protocols of their home states.

Single-Member LLC

The IRS will consider the tax status of the LLC as a disregarded entity if the members do not elect another classification. As a result, the federal tax return will reflect the profits or losses of the LLC.

Single-member LLCs must file Schedule C with Form 1040, which contains information about the annual income tax return of an individual. Schedule C allows an individual to report income or loss from a business. This includes income, expenses, and costs of goods sold.

Businesses that own rental properties must file Schedule E instead of Schedule C. The form allows the entity to inform the IRS of the income or loss from rental real estate and other ventures.

Multi-Member LLC

The IRS treats a multi-member LLC as a partnership. A partnership “passes through” profits or losses to the partners, much like how a single-member LLC is treated. Naturally, having several members makes it more complicated to file taxes.

The partnership needs to submit Form 1065 to the IRS. This includes income, deductions, tax, and payment. It also asks for other information, such as entity type and stock ownership.

Moreover, the IRS requires each member of the LLC to provide Schedule K-1. This is a report of the income, deductions, and credits of each share of every member in the partnership. Filing Form 1040 must include details from the K-1 in your Schedule E.

C Corporation

After submitting Form 8832 to be elected as a corporation, the LLC must file Form 1120 to report income, deductions, tax, refundable credits, and payments. 

It also contains Schedule C for dividends and special deductions. Schedule J deals with tax computation and payment, while Schedule K asks for other information, such as accounting methods and products or services.

S Corporation

S corporations elect to pass the income, losses, and deductions of the company to the members for federal tax purposes. This form of taxation works similarly to that of a single or multi-member LLC. However, members must file more documents.

How to file business taxes for LLC to be considered an S corporation?

Filing business taxes for an LLC to be considered an S corporation requires the company to submit Form 2553 instead of Form 8832. This requires the following details:

  • Election information
  • Selection of fiscal tax year
  • Late corporate classification election representations

Once the IRS approves the classification, the members will then file Form 1120-S to report the income, losses, deductions, and credits of the LLC. 

Take note that the IRS considers an S corporation as a pass-through entity. Hence, each member will receive Schedule K-1. It contains information about the following:

  • Partnership and partner
  • Partner’s share of income, deductions, credits, and other items

The IRS requires each member to report such information on Part II of Schedule E (Income or Loss From Partnerships and S Corporations). Schedule E then gets filed with Form 1040. 

Estimated Tax

The IRS requires sole proprietors, partners, and S corporation members to pay estimated taxes if they expect to owe a tax of $1,000 and above. The IRS set a lower range of $500 or more for corporations.

Individuals must pay estimated tax on income not subject to withholding. For instance, owners who receive interest, dividends, capital gains, and self-employment income must file Form 1040-ES or the Estimated Tax for Individuals. Keeping track of payments is essential for tax return reports.

Self-Employment Taxes

Individuals that earn income from business activities must submit Schedule SE and pay self-employment taxes. The IRS sets this at 15.3%, which covers 12.4% for social security and 2.9% for Medicare.

But if the LLC was elected as a C corporation or S corporation, it does not need to pay self-employment taxes but would have to pay payroll taxes instead.

Tax Return Due Dates

Knowing how to file taxes for business LLCs also entails taking note of the different due dates of each form:

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Tax status

Forms

Due dates

Single-member LLC

Schedule C and Schedule SE

April 15

Multi-member LLC

Form 1065 and Schedule K-1

March 15

Schedule E and Schedule SE

April 15

S Corporation

Form 1120 S and K-1

March 15

C corporation

Form 1120

April 15

Business owners can file for an extension if they cannot meet the deadlines of the different tax filing dates. Owners who deliberately ignore these deadlines can receive penalties imposed by the IRS.

Let Experts Prepare Your Taxes

Filing taxes and taking note of due dates can be stressful for business owners. NCH and our business partner, Campbell Jones Cohen CPA, provide insights from CPAs and senior tax accountants. Our business startup specialists offer tax consultation, preparation, resolution, and bookkeeping services.

You can save yourself thousands of dollars by making informed tax decisions and handling them in the best possible way. Our tax consulting service can help you better understand your tax write-offs and how to properly keep track of those expenses.

Use our tax service so that you can get help from CPAs and senior tax accountants. Focus on growing your LLC without worrying about complicated taxes.

 

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