LLC (LIMITED LIABILITY COMPANY)
LLC (Limited Liability Company) is a separate tax entity from its owner and is subject to taxes. LLC has a least complex or the simplest business structure. Moreover, LLC has got a flexible structure unlike an S-Corporation and C-Corporation. However, the company cannot be held responsible for the company’s debts and liabilities. Furthermore, Limited Liability Corporation’s features come somewhere between a Corporation and a Sole Proprietorship.
Wondering about all the advantages of forming an LLC? Find them below.
Taxation Procedure of an LLC
The owners of an LLC are usually taxed at their personal tax rates. Further, an LLC isn’t a taxing entity and thus is not recognized by the IRS for tax purposes. Taxation in case of an LLC may be more or less similar to a Partnership or a Corporation. The way in which an LLC pays taxes is mainly determined by the number of members who works under them and whether the LLC wants to be treated as a different business due to certain tax purposes.
In case of a single member LLC, it is taxed as a sole proprietorship. While an LLC with more than one member pays tax as a partnership. In a single member LLC, the net income is normally prepared using Schedule C, though the single membered LLC is thought to be a disregarded entity. Disregarded entity means that the owner and the LLC are considered to be separate entities.
When it comes to partnerships or multiple-member LLCs, they are not subject to paying taxes directly to the IRS. On the other hand, the individual members pay tax based on their share of income in the entity. They file information return using Form 1065, after which a Schedule K-1 is prepared for each individual partner.
Properties and Benefits of Forming an LLC
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