Tax Treatment of Single-Member LLC
A single-member LLC is treated as a disregarded entity for income tax purposes. Income and expenses are reported on the owner’s tax return. The member avoids double taxation of income.
Franchise Tax and Benefits
Every single-member LLC pays an $800 Franchise Tax to the Franchise Tax Board annually. It offers liability protection and tax benefits.
LLC Ownership and Structure
An LLC provides limited liability protection to its members, with personal assets generally shielded from the company’s debts. Ownership can include individuals, corporations, and foreign entities, with no maximum number of members.
Choosing between an LLC and a corporation depends on business type, finances, and long-term goals. The member of an LLC taxed as a Sole Proprietorship does not take a salary but a "draw" of profits.
An S corporation (S corp) may provide tax-saving benefits for your business. Understanding the differences between an LLC and an S-Corp is essential.