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BK-CPA, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 933
Experience:  Owner of a CPA firm
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My son and I Incorporated our business last year to an LLC.

Customer Question

My son and I Incorporated our business last year to an LLC. He is the owner of the business and we have had payroll companies process payroll since the formulation of the company. The LLC is registered in New Jersey. There are multiple members with our LLC whom are the two of us.
We are currently filing taxes as a business for the first time and need to make sure we have filed all the proper documents. We have quarterly taxes paid through our payroll services via form 941 which our taxes is taken out and pay the IRS directly. Do I need to file a Schedule C since our payroll service is covering this?
Can my son file his taxes “normally W2” since he had multiple jobs last year? Do we file a Business Tax Return for our LLC?My Son is the Sole Owner and we are not a partnership. I work for the company both my son and I are paid through a payroll service. The LLC is a Domestic Limited Labiality Company registered in United States NJ as an LLC Not listed as a C or S Corporation, We will include a copy of the formulation documents. We got a wonderful response from Levy and are trying to get our formulation documentation back to your tax team. Thank You
Submitted: 1 year ago.
Category: Finance
Expert:  BK-CPA replied 1 year ago.
Hello and thank you for your question. You "organized" a LLC, but did not "incorporate" a LLC. It's a seemingly small clarification to you I suppose, but in terms of taxation it's a big difference. Your son should not be on the payroll if he is the sole owner of the LLC. You both should not be on the payroll if this is a partnership. You've provided conflicting statements above so I'm not sure which. Having multiple members, both you and your son, means it's a partnership. You then say your son is the sole owner. Owners of a LLC are specifically called "members." If the LLC is not treated as a c-corporation or a s-corporation for tax purposes, then its either a partnership or a disregarded entity (meaning the IRS could care less if there is a LLC for income tax purposes). The same holds true at the state level: Your son should not have gotten a W2 because it's not a (c or s)-corporation. That much is clear. He should have his payroll taxes amended for the entire year. If it's a partnership, Form 1065 should be completed and you should also be stripped from the payroll by filing amended returns. Schedule K-1s with income allocable to the members will be used to prepare their personal tax returns. Amounts shown on Schedule K-1 can go to all kinds of forms on the 1040, but generally they flow to Schedule E. If it's a sole proprietorship, then your son would complete Schedule C. It sounds like you need professional help. My honest suggestion is to get a paid preparer. Chances are you'll save money by doing so in addition to a whole lot of time because, contrary to what its advertising suggests, TurboTax (or whatever) doesn't turn you into a tax pro. If it's just a sole proprietorship and you get a handle on things going forward, noting you can reference what was done by a pro in prior years, then maybe try preparing the returns yourself in future years. Good luck.