A single-member LLC tax form is to be completed based on the current status and structure of the business. Once formed, the IRS does not recognize LLCs for taxation. This means they file as a disregarded entity. If you do not elect corporate taxation, you will be taxed as a sole proprietorship. This means that all profits and losses will be reported on your individual Schedule C.

What Is a Single-Member LCC?

People in business often begin their journey as a sole proprietorship. Although this is an ideal starting point, this type of entity does not offer the level of limited liability that many business owners seek. That is why many choose to form a single-member LLC.

An LLC is a separate entity that allows business owners greater flexibility and protection. It is also considered to be a pass-through entity, offering benefits in relation to taxation.

Advantages of a Single-Member LCC

There is a wide range of benefits associated with a single-member LCC, including:

  1. Minimal compliance requirements — It is fairly simple to form a single-member LLC since they have fewer regulatory requirement. After you submit articles of incorporation to your secretary of state, the regulations are minimal in comparison to corporations.
  2. Taxes and expenses — You can elect to be taxed as a corporation, but if you don't, you can still continue reporting your company's taxes on your self-employment income.
  3. Greater professionalism — With "LLC" attached to your business name, vendors and customers will take you more seriously without your having to incur the cost of incorporating.

Things to Do for Single-Member LLCs

While operating a single-member LLC, be mindful of the following:

  • Once you have filed to form your LLC, complete IRSForm 8832 as soon as possible. This will allow you to elect corporate taxation and avoid self-employment tax. Also, if you would like to be considered a multi-member LLC, you can issue a small percentage of the company to a close family member. Issuing even 1 or 2 percent will allow you to convert your status.
  • If you are filing as a "disregarded entity" (which means you did not seek corporation election), include your LLC's tax number on your Schedule C when filing your annual tax return.
  • From the start, keep impeccable records. Document every major decision made in the business.
  • Separate your business finances from your personal bank account. This includes all expenses.
  • Sign all of your paperwork on behalf of your LLC. For example, your signature may be, "John Smith, on behalf of JS Marketing, LCC."

How Single-Member LLCs Pay Federal Income Tax

As mentioned, by default the IRS treats LLCs as disregarded entities. This means that the LLC will not be viewed as a separate entity from its owner. The LLC's income and losses will be reported on the single member's personal tax return. To complete this step, you will need to attach Schedule C, Profit and Loss From Business, to your return.

To complete this form, you will need to have good records of your LLC's expenses and income. Keep all of your receipts throughout the year, and remain organized. In addition, if you are using a home office, keep all of your expenses in relation to that workspace. To claim these expenses, complete Form 8829.

The total income (or loss) from your Schedule C will then be reported on your personal Form 1040. Remember, even if you do not withdraw the profits of your LLC, you still need to report that value as income. If you have another job outside your LLC, you will combine your income from both and pay taxes on that total amount.

Regardless of how you structure your LLC for tax purposes, it is imperative that you develop good habits from the start. This means making sure all of your records are up-to-date. Take a few hours each week to make sure your books balance. This will not only help you better prepare for tax season but also make you more aware of what's going on within your business. Crunching numbers will allow you to see the "bigger picture" and in turn help you make more informed decisions moving forward.

If you need help with your LLC taxes, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.