LLC Answers

From an LLC tax perspective, the default tax structure for a limited liability company is pass through taxation which means that whatever tax is owed gets passed through to the owners of the LLC.

At the end of the tax year, the tax items of the LLC are reviewed and it is determined whether the business made a profit or loss.  If it is a profit, then for tax purposes, the profit allocation is attributed to the members.  If there is only one member, that member will have to pay taxes on that profit amount through his or her persona return.  … Continue Reading

There are many benefits to you when forming an LLC for your business. First and foremost is limited liability protection. By running your business in a separate entity such as a limited liability company, you are not personally liable for any liabilities, problems and lawsuits that arise due to your business activity. This is a huge benefit.

Many non-LLC owners are shocked every year when they get personally sued for business problems and find that they need to sell their personal assets (like their home, car, other property) or lose their personal savings to cover any resulting liabilities.

Other benefits of forming … Continue Reading

In May of 2007, the second circuit ruled in the McNamee v. IRS case that a single member of an LLC was personally liable for the employment taxes owed by the single member LLC that was taxed as a disregarded entity for federal tax purposes.

The court specifically states that the personal liability existed because the LLC did not elect to be taxed as a corporation.

This is an important ruling for those single owner LLC businesses that plan on having employees.  It may be worthwhile for those single member limited liability companies who have or intend to have employees to consider … Continue Reading

In 1997, the Internal Revenue Code passed regulations called the "Check the Box" rules which opened the floodgate for new limited liability company formations.  These rules took away very complicated and uncertain regulations for how a limited liability company would be taxed for federal income tax purposes and basically said, "Let each limited liability company decide for itself how it wants to be taxed."

LIMITED LIABILITY COMPANY CAN BE TAXED AS A CORPORATION IF IT DESIRES

Bfore 1997, one of the biggest reasons for choosing a corporation over a limited liability company WAS taxation.  Some businesses were better off being taxed as … Continue Reading