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Before you can file your LLC federal tax, you must first decide on your entity classification. Just as with a standard company you have sole proprietors and partnerships among other forms of business, the same holds true when you form an LLC to conduct business.
Types of Classifications
There are several forms of LLC companies to choose from. How you file your LLC federal tax will depend upon the classification you choose when you set your company up. These include:
The purpose of the LLC is to limit the liability of owners for debts incurred by the company in the event of failure among other things. It was also intended to keep LLC federal tax simple by acting as a pass-through entity, allowing tax returns to be filed on the owner’s personal tax return.
When your earnings reach certain levels however, it may be best to elect corporate taxation such as with an S Corporation to gain lower tax rates. The trade off for limited liability with the LLC can result in higher taxes for an individual.
Types of Classifications
There are several forms of LLC companies to choose from. How you file your LLC federal tax will depend upon the classification you choose when you set your company up. These include:
- Single Member LLC – Generally files as a sole proprietor
- Multiple Member LLC – File same as you would with a partnership
- LLC Corporate Taxation – You can file form 8832 with the IRS to allow to be taxed as a corporation. There may be some tax advantages in this. It is best to seek advice from a competent professional, because things begin to get a little complicated here.
The purpose of the LLC is to limit the liability of owners for debts incurred by the company in the event of failure among other things. It was also intended to keep LLC federal tax simple by acting as a pass-through entity, allowing tax returns to be filed on the owner’s personal tax return.
When your earnings reach certain levels however, it may be best to elect corporate taxation such as with an S Corporation to gain lower tax rates. The trade off for limited liability with the LLC can result in higher taxes for an individual.
