LLC Taxation Services

A limited liability company (LLC) is a flexible business structure. The Limited Liability Company, LLC, is a type of business structure that protects its owners from personal liability. The LLCs offer tax treatment options that are one of its major benefits. Here at Wasserman CPA, we help businesses select their preferred tax status for LLCs. The LLC can be taxed as — depending on the unique requirements and to achieve maximum tax efficiency and to satisfy the business objectives:

• Single Member LLC (Sole Proprietorship)
• Partners (in case of Multi member LLCs)
• S-Corporation (for LLCs looking for certain tax benefits)
• Each classification has different tax liabilities and advantages, indicating below:

Sole Proprietorship Taxation for an LLC

Single-member LLCs by default pay taxes as a sole proprietor. As a result, LLC income and expenses are reported by you on your personal return (Form 1040, Schedule C) — the LLC does not file its own tax form.

Tax Benefits of Sole Proprietorship

• Easy Filing Process: No separate business tax return Because all income and expense is reported on the individual return.
• Pass-Through Tax: The LLC avoids double taxation, all the income is instead passed through to the personal taxes.

LLC Taxation as Partnership

By default, if the LLC has more than 1 member, it is taxed as a partnership. This necessitates that the LLC file Form 1065, an informational return that relays the income, deductions, and credits of the business. Every LLC member receives a Schedule K-1, and the reported amount gets accounted for on the individual tax return by way of showing their share of the income.

Pros of Partnership Taxation

• Pass-Through Taxation: Similar to a sole proprietorship, the income passes through to the respective individual members, avoiding any double taxation.
• Flexibility in Profit and Loss Allocation: Members can choose how to distribute profits and losses as long as it is properly documented in the operating agreement.

Paramount Elements of Partnership

• The members pay self-employment taxes on their share of the profit.
• Disputes can easily be avoided with proper bookkeeping and operating agreements.

LLC Taxation as an S-Corporation

Taxation of an LLC as an S-CorporationAnother popular option for LLC taxation is S-Corporation. This option is often chosen by businesses that want to save on self-employment taxes. Under this structure, business owners are expected to pay themselves a “reasonable salary” for the work they perform. Dividends from your remaining profit after you take away your self-employment tax.

Advantages of S-Corp Taxation

• Self-Employment Tax Savings: Owners may save on self-employment taxes by taking a reasonable salary and receiving the rest as dividends.
• Limited Liability Protection: The LLC structure provides limited liability protection from business debts, while electing S-Corp status gives you tax savings.

Key S-Corp Considerations

• Owners must pay themselves a reasonable salary, which would be subject to payroll taxes.
• It does require more administrative overhead (setting up payroll, managing salary vs. dividend distributions… etc.)

However, we will often offer some pragmatic tips on setting up an LLC for optimal tax treatment:

• Separation of Personal and Business Finances: It is essential that you keep a bank account solely for the LLC this will also help make things easier to account for and lowers the risk for any future legal concerns.
• Estimate Quarterly Taxes: Generally, LLC owners should make estimated quarterly tax payments to avoid end-of-year penalties.
• Keep a Close Eye on Deductions: Every single legitimate expense counts, from common office items to business travel expenses. By tracking appropriately it gives you the maximum deduction and minimum taxable income.

• Fresh Local Insight: As a local office here in South Jersey, we know how to take care of local businesses.
• We have over 30 Years of experience: The long experience that we have enables us to approach almost all cases that require treatment, and we know how to provide proper solutions for every different business.
• Service That Moves You: We don’t just prepare your taxes — we pay attention to your business objectives and advise you accordingly.

To get the best tax treatment for your LLC, call Wasserman CPA. Whether you are confused about the best tax classification for your LLC, or you need assistance maintaining good tax compliance, we are ready to partner with you for success.

Call us today for your consultation, and let us help you to structure your LLC taxes in the smartest way!