Click the following link to find three sets of IRS tax forms & instructions for LLCs-PDF zipped file.
Your LLC tax elections can mean the difference between business success and failure. It is an important decision that frankly most people just default on. It is often the tax elections you choose that make all the difference in your bottom line. What are your IRS choices if you have an LLC and what happens if you don’t meet the IRS filing deadlines?
How Is an LLC Taxed?
When the LLC was first introduced in the United States in 1977, the IRS was asked how it would be taxed. It was expected that the IRS would write a code section to “govern” LLCs.
They had written code sections for corporations (Chapter C and Sub Chapter S). They had also made code sections for partnerships, limited partnerships, and sole proprietors.
Finally, in 1996 the IRS came back with their answer. They wouldn’t write a new code section for LLCs. They just said they didn’t care how the LLC was taxed. It became a “check the box” game.
You get to decide how your LLC is taxed. If you choose to have it taxed as a Sub Chapter S corporation, the IRS thinks you have a Sub Chapter S corporation. You have to follow all the rules under Sub Chapter S.
You can choose to have it taxed as a C corporation. Note that if is taxed as a C corporation it is not a pass-through entity.
Because the IRS doesn’t care how you have it taxed, this gives you a great opportunity. You get the double asset protection of an LLC, and you get to choose how you pay your taxes.
The Most Common Tax Structure-By Default
When you file your papers with your state, the clock starts ticking. You need to start filing papers with the IRS. If you don’t meet all the deadlines and file the different elections in the right order, the IRS gives you a default tax status. Your LLC will default to a sole proprietorship tax structure if you have a single member LLC, or a partnership tax structure if your LLC has more than one member. These are generally not good options for most people
The tax advantages you get with your LLC can mean the difference between business success and business failure. I have seen small companies double their profits by making the correct tax elections. It’s a big deal! When you are ready to save, make sure you study my FREE e-Book, “Ten Tax Tips“.