Have a Tax Question? Ask a Tax Expert
The single member LLC and the sole proprietorships are both considered disregarded entities ... this really just means that there's no BUSINESS tax return to file ... I would recommend starting with the LLC... as it is as flexible as a partnership but still provides the liability protection of a corporation
How wiuld the LLC effect my taxes?
As EITHER a single member LLC or a sole proprietor, you'll just attahe a schedule C to your tax return and all of the business profit (or loss) will flow to line 12 of your person return (business income or loss) ... and again, of the two I would do the LLC because (1) you get that corporate liability protection which the sole proproetorship DOES NOT provide and (2) you can always elect to be taxed as a, S-Corp later
On the taxes, Sope props, LLC's partnerships ALL are what's called pass-through entities, meaning that the income (and expenses) of the business flow through to your personal return ... so on that schedule C for you LLC you can write off ALL of the legitimate business expenses and will only pay taxes on the profits
Why did you do that?
That afects my ratings and my pay
We're not even close to done here
What do I need to do to get you to upgrade that?
All right I'll go ahead and give you the information and hope you'll do the honorable thing ... and I refuse to oversimplify
(1) LLC is a pass through for taxes ... You use the schedule C when you file your return to list all income and expenses and only the income (after subtracting expenses) is taxable you can even show a tax loss
(2) sole proprietorship is the same (BUT, no liability protection, your business creditors or lawsuits can come after you personally)
(3) Sub-chapter-S Corporation (sometimes called an S-Corp) is also a passthrough, but must file a separate business return and has much more administration and paperwork ... but still doesn't pay it's own taxes... the s-corp tax return rather than having a tax bill is "Flowed" to the individual tax return, just as the Sole prop and the LLC
(4) C-roporation files its own return and DOES pay it's own taxes, therefor you will be taxed doubly, ...1st the corporation pays its own corporate taxes and then you are taxed on any dividends you take out personally
Full circle back to your questions, if you set up an LLC through your state and you are the only owner you will be treated as a disregarded entity by IRS .. you'll just do your taxes and attache the schedule C for your business ... you will do the same for a sole proprietorship .... for an S-Corp or a C-Corp you will have to file your own tax return AND the business return Form 1120-S or form 2210 respectively, and will only pay a separate corporate tax is you choose the C-Corp
I hope you'll reconsider my rating ... I'll be glad to answer any follow-up questions ... and I can provide any of the forms you need here
Let me know