Overview of LLCs
An LLC protects owners from personal liability for company debts. LLCs don’t pay taxes directly; profits/losses are reported on owners’ tax returns.
Advantages and Disadvantages of LLCs
LLC advantages: liability protection, tax flexibility.
Disadvantages: complex taxes, paperwork.
Steps to Register an LLC
- Choose a business name
- Select registered agent
- File formation documents
- Create operating agreement
- Get EIN
- Set up licenses and permits
Making Money with an LLC
- Define business goals and target market
- Formally register the LLC
- Arrange financing and accounting
- Market services and products
- Provide quality and value
Tax Considerations for LLCs
IRS treats single-member LLCs as sole proprietorships for taxes.
States charge LLC formation fees. LLCs aren’t required to show profit, but the IRS may audit if claiming deductions without income. IRS only allows 3 years of losses out of 5.
FAQs about LLCs
Can I keep my LLC if I don’t make money?
The LLC must file a tax return unless it had no income or expenses during the year. An LLC does not necessarily need to make any income to be considered an LLC.
Do LLCs get tax refunds?
LLCs can elect C corporation status to receive refunds if quarterly estimated payments exceed the tax liability. LLCs set up as S corporations file a Form 1120S but don’t pay any corporate taxes on the income.