Register LLC With IRS: Everything You Need to Know
To register LLC with IRS, you must file the correct forms, which will depend on the ownership of the LLC. 3 min read
2. Limited Liability Company (LLC)
3. What Is a Responsible Party?
4. Benefits of an LLC
5. Taxation of an LLC
Register LLC with IRS
To register LLC with IRS, you must file the correct forms, which will depend on the ownership of the LLC. As a business owner, the last thing you want to deal with is not properly paying the IRS.
Limited Liability Company (LLC)
An LLC, also known as a limited liability company, is a form of business that offers pass-through taxing like a partnership or sole proprietorship along with limited liability protections like a corporation.
LLCs protect your personal assets while also claiming your business’s profits on your personal taxes. An LLC will also allow you to choose from different forms of taxation. You can choose to be taxed as a sole proprietorship or an S corporation.
LLCs are the most popular types of business structures in the United States. The IRS defines an LLC as a limited liability that is a structure allowed by state statute.
LLCs are formed by filing articles of organization with your Secretary of State.
The properties of an LLC are:
· LLC owners are considered members. Members can be individuals, corporations, or additional LLCs.
· LLCs can be formed by one member or more, with no cap on the number of members.
· No active LLCs can have the same name within the same state.
· LLCs have to choose to be treated as a corporation or a partnership with regard to taxation. They are otherwise disregarded as a separate entity.
What Is a Responsible Party?
A responsible party is an individualwho has control over the money and assets in the business that allows him or her to control, directly or indirectly, the business and how its funds are used. LLCs with more than one owner must have one individual that is named the responsible party for obtaining a tax identification number for the LLC. The LLC can have as many owners as it wants, but only one can be the responsible party for applying for the tax identification number.
Benefits of an LLC
There are several benefits of having an LLC, including the following:
1. Protection of Assets: An LLC gives limited liability protection to its members that are not held personally responsible for any debt or obligations of the company. Lenders are not allowed to come after the personal assets of the members to pay any business debt, including bank accounts and property. Partnerships and sole proprietorships are not afforded this protection, leaving them open to business debt.
2. Pass-Through Taxation: In general, LLCs do not pay taxes at the business level. Income or loss from the business is passed through to the owners and reported on their personal income taxes. Taxes are then paid individually.
3. Increased Credibility: Creating an LLC helps a company look more credible with other businesses, associates, employees,and customers. It appears you have made a serious commitment to the business.
4. Few Compliance Requirements: An LLC will not have as many demands as S and C corporations.
5. Flexible Management: An LLC may create any type of organizational structure it desires per the agreement of all members. An LLC may be managed by the owners or supervisors. This is different than corporations that have a board of directors that are in charge of business decisions and management of the day-to-day operations.
6. Fewer Restrictions: LLCs have fewer limitations with regard to who can own an LLC and how many can have ownership.
Taxation of an LLC
A single-member LLC is established when there is only one owner. This type of LLC is taxedlike a sole proprietor. All profits and losses are passed on through the owner’s federal income tax return. If more than one person are members of an LLC, it is then known as a multi-member LLC. This type of LLC is taxed like a partnership. All profits and losses are also passed through to the individual tax returns of all members.
LLCs are also taxed by the state, which will vary. For instance, there is an annual $800 tax on all LLCs, in addition to an income-based annual fee if an excess of $250,000 is earned in a year. This additional tax is why some members choose not to form an LLC if the owner is not persuaded by the liability protection.
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