LLC Tagged as S Corp and Corporation: When you run a business as a sole proprietorship, you are not held to the same filing requirements as many businesses. A sole proprietorship is considered an individual, not a partnership. Therefore, the corporate form needed when running a business is an LLC, not a corporation. You will still be subject to all state filings, but as an individual, your liability on state tax will be decreased. In many cases, the LLC forms can be filed as a sole proprietorship or a corporation, which will also have its own set of state filing requirements.
If you have multiple people working under you, each one of them is treated as an individual for tax purposes. This means that each person’s liability on income taxes is decreased by the liability of all of the business owners. This means that each one can file their own return and owe no income or state tax to the state at all. In fact, some business owners choose not to file any returns at all, thus keeping their liability as low as possible.
In many cases, sole proprietorships and corporations are treated alike. The only real difference between these two forms is their formal structure. LLC is the most popular and this is reflected in the name. However, LLCs can be registered in different names with different formal structures, such as one individual, one partnership, etc. Many business owners prefer to use an LLC because it has the advantages of being a short, simple, and easy process to start an LLC.
When you use an LLC as a corporation, the state will treat your LLC as a separate entity from your personally owned company. This separation means that the personal state tax liability will be reduced. This reduction is in most cases equal to the commercial state tax liability. When you use an LLC as a sole proprietorship, you will be taxed as a sole proprietor, which is subject to the double taxation clause of the corporate tax law. So, the first time you start an LLC, it pays to think about whether it is really a good idea to do so.
If you have any doubts about whether an LLC would be a good choice for your business, you should consult a lawyer. He or she can help you determine whether your LLC is properly structured so that it will meet the IRS requirements. He or she can also inform you if you should use an LLC or form of corporation for your business.
Many business owners choose an LLC for the reasons that they believe it simplifies their business structure. There is no doubt that an LLC reduces your liability as a business owner; but, it is important for you to remember that it may also increase your tax liability when you do owe taxes. In this case, it may make more sense to pay the taxes at the end of the year than it does to simply use an LLC. However, an LLC is a good choice for many business owners, because it allows them some liability reduction while avoiding double taxation on their business income.