If you have a LLC or Limited Liability Company, you may think to file the LLC taxes yourself. However, if you are concerned that you don’t understand the LLC tax code or that you might be about to make a costly error in your filing, it is better to hire a tax advisor who knows not only the tax code, but can find the best options for you, saving you thousands of dollars in needless taxes and fees.
The LLC self-employment tax rules were set up to help small companies avoid having to pay some very large amounts of federal taxes in many cases, but did not absolve them from paying any taxes at all. Forming a limited liability company (LLC) does not allow a company not to pay taxes, it simply changes the way that those taxes are figured by the IRS. While it may mean no more federal taxes on the business itself, it does not mean the same thing for each member or partial owner of the LLC and will not end the cost of state taxes.
A LLC can be deemed either a single owner or multi-owner LLC by the IRS and will depend on the number of technical owners there are. Each owner is referred to as a “member” and will have to file taxes on their share of the businesses profits and losses. The amount of profits that would rightfully be theirs is called a distributive share and is taxable whether the amount was realized, distributed or not. Even if the amount of your share had to stay in the business, you must still pay the taxes on it. The amount of your distributive share will depend on the amount that you put into the business. For instance, if you merely invested in the company, but do not actually do anything toward its success otherwise, you may have a lower share amount than someone who not only invests their money but their time and hard work as well.
There are many to forms to include, not only for your personal taxes but to report the income and expenses as well as the profit or loss of your LLC.
States have their own individual rules for handling LLC and their taxes although many of them do have similar rules. While most do not have taxes specifically for the LLC they do impose fees that can be as small as $100 or as high as $800.