File LLC Taxes Online: Everything You Need to Know
Knowing how to file LLC taxes online can seem complicated, but any business can do them once they know the steps.3 min read
2. Benefits of an LLC
3. Taxation of an LLC
4. How to Obtain an EIN for Your LLC
5. How to File Taxes for an LLC — Schedule C
6. How to File Taxes for an LLC — IRS Form 1065
Knowing how to file LLC taxes online can seem complicated, but any business can do them once they know the steps.
What Is a Limited Liability Company (LLC)?
A limited liability company, or LLC, is a commonly formed entity many businesses use. The advantage of an LLC is the business structure is flexible, which decreases the chance of personal assets being at risk. The state stature allows limited liability companies to exist.
An LLC is created when a company files the articles of organization with the secretary of state. LLCs have the following properties:
- LLCs can be formed by multiple members (no maximum amount of members).
- Owners are called members, which can be foreign entities, individuals, other LLCs, and corporations.
- LLCs can be treated as a corporation or partnership for federal tax purposes.
- Each LLC must have a different name and cannot be the same as another in the state.
Benefits of an LLC
A benefit of having an LLC is there are fewer compliance requirements. This means LLCs have less on-going state enforced and yearly demands than C and S corporations do. LLCs have a flexible arrangement when it comes to management. They can create any organizational structure as long as all the business owners agree to it. LLCs can be managed by supervisors or owners. This differs from corporations, where the board of directors is in charge of supervising all crucial business decisions.
Many owners also like the fact that limited liability protection is provided to members of an LLC. This means lenders can't go after the members' personal assets in order to pay the debt of the company. Having an LLC is also a tax benefit, as taxes don't need to be paid on a business or company level. Any loss or profit from the business is "passed through" to the owners, which will get reported on their individual income tax returns. Taxes get paid out at an individual level.
Creating an LLC can give a business heightened credibility. When workers, associates, prospective customers, and sellers see the company is an LLC, they'll look at it as more reliable and professional.
Taxation of an LLC
Limited liability companies get taxed based on what each state's tax level is. As an example, California has a yearly $800 tax for all LLCs in the state. They also have an annual fee that's income based if the LLC had a profit of more than $250,000 in a tax year. This $800 fee is why many businesses won't form an LLC — they don't feel the fee is worth the liability protection.
If one person is creating an LLC, this is called a single member LLC. These LLCs are taxed as sole proprietors, which means any losses or profits get passed through to the person's federal tax return. If multiple people are members of an LLC, this is called a multi-member LLC. It gets taxed as a partnership, which means any profits or losses get passed through to each member's federal tax return.
How to Obtain an EIN for Your LLC
To obtain an EIN for a company's LLC, an EIN application needs to be submitted to the IRS. One member from the LLC must be designated as the managing member for the purposes of getting the tax ID. Their name and social security number will need to be provided.
How to File Taxes for an LLC — Schedule C
To file taxes for an LLC Schedule C, fill out and file the Schedule C with the individual Form 1040 if the LLC is taxed as a sole proprietorship. Individuals who are sole proprietors must pay federal income taxes on business losses and profits by putting down what the amounts are on the Schedule C. If the business deals with a specialty field such as fishing or farming, substitute Schedule E, F, or J for the Schedule C.
How to File Taxes for an LLC — IRS Form 1065
If the LLC is taxed as a partnership, fill out and file IRS Form 1065. Give a Schedule K-1 to all members in the LLC.
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