LLC Tax Treatment Options
Any LLC can choose corporate tax treatment by filing IRS Form 8832. This is lower than top individual rates from 22% to 37% that would apply to LLC members. The self-employment tax rate for LLCs is 15.3%. If your LLC has $100,000 profit, you owe $15,300 in taxes. This tax also applies to net earnings. Fortunately, it is deductible on personal returns.
As LLC taxes pass through to members, the rates mirror those for federal income tax. Marginal rates apply, so not all income is taxed equally.
Tax Treatment Based on LLC Structure
A single-member LLC defaults to sole proprietorship taxes. Multi-member LLCs follow partnership rules. Owners can also elect S corporation taxes.
Tax Requirements for Small Businesses
Small businesses must file taxes. The business structure impacts taxes. Sole proprietorships pass through taxes to owners. They pay personal rates. Partnerships pass through taxes to partners. Partners pay personal rates. C corporations pay a 21% tax rate.
You must file if net earnings exceed $400. The self-employment tax rate is 15.3%. It applies to net earnings. You can deduct it.
Tax Filing for Small Businesses
To file, track income and expenses. Then calculate profit/loss. File returns quarterly and annually. Pay income tax, self-employment tax, excise tax, and more. Take deductions and credits to lower taxes.
Sole proprietors report on personal returns. C corporations file business returns. LLCs can choose pass-through or corporate treatment. This affects taxes.
If your business operated at a loss, deduct it from income. File even if income was $0. There may be benefits. Missed deadlines bring penalties. File extensions to avoid them.
Tax Planning for Small Businesses
Plan ahead for taxes. Set aside 30-40% of income quarterly. This covers potential extra taxes. Base estimates on projected annual revenue. Adjust as needed. Proper planning eases the process.