Limited Liability Company Tax Return

In GVA we provide various kinds of services relating to LLC right from the formation of an LLC to filing the return and our main focus will be on tax planning.

A Limited Liability Company (LLC) is a business structure allowed by state statute. LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation. Owners of an LLC are called members. Members can be individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single member” LLCs, those having only one owner.

The federal government does not recognize an LLC as a classification for federal tax purposes. An LLC business entity must file a corporation, partnership or sole proprietorship tax return. An LLC that is not automatically classified as a corporation can file Form 8832 to elect their business entity classification. Form 8832 is also filed to change the LLC’s classification. That means an LLC can take advantage of lower tax rates without having to change its corporate structure.

Common Errors while forming an LLC

If you convert an existing business, such as a corporation, into an LLC there may be tax implications.

• The conversion may result in taxable gains
• Employment tax wage bases may be affected

Implications of LLC formation

It will avoid double taxation unlike corporations.

Owners have limited personal liability for the debts and actions of the LLC.

Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.

Tax Disadvantages of the LLC

LLC owners must pay taxes on their distributive share of the profit of the company, even if they have not received a distribution of those profits.

LLC owners must pay self-employment taxes (Social Security/Medicare), while corporate owners who serve as employees only pay half of the self-employment tax amount on their salaries; the rest is paid by the corporation.

Preparation of Forms

• Schedule C & E (1040) – If the only member of the LLC is an individual, the LLC income and expenses are reported on Form 1040, Schedule C, E, or F.

• 1065 – Most LLCs with more than one member file a partnership return, Form 1065. If you would rather file as a corporation, Form 8832 must be submitted. .

• 1120 & 1120S – If the only member of the LLC is a corporation, the LLC income and expenses are reported on the corporation’s return, usually Form 1120 or Form 1120S.

Every company’s tax situation is different, and tax situations change over time as a company grows and becomes more profitable. We in GVA make sure that we customize our services per your requirements.