How will my LLC be taxed?
You should speak with a CPA about the tax consequences of operating your business as an LLC. Generally, a single member LLC is taxed by the U.S. Internal Revenue Service (IRS) as a “disregarded entity”, meaning that the LLC files no tax return, and the profits and losses of the LLC are instead passed through to the member’s individual tax return. The members of a multi-member LLC are taxed under the U.S. partnership tax laws and regulations. However, both a single member LLC and a multi-member LLC may elect to be taxed as a corporation by making an election with the IRS to be taxed as an S-Corp. The typical benefit of an S-Corp election is the avoidance of having to pay a portion of the FICA tax. However, there are many other consequences to making an S-Corp election, many of which may be disadvantageous to your tax situation. Therefore, you should carefully consult with us and with a CPA to determine the optimal tax structure for your LLC.
