When you started your own company, you undoubtedly conducted a thorough review of the possible business entities you could have created. In the end, you chose a limited liability company for many reasons. Of course, you may still have concerns over doing your taxes in association with your company.
Just as with any other job you held, taxes play a major role in the running of your business and any profits you make. If you recently started your business, you may have not had to file your taxes in relation to the business as of yet. Still, you do not want to find yourself scrambling when tax time rolls around, and having the information ahead of time could prove immensely useful.
Do you have a single-member LLC?
If you own a single-member LLC, the Internal Revenue Service will tax your business as a sole proprietorship. This action means that any profits and losses incurred by the business will be taxed using a Schedule C tax form, and the net income from that form will then go onto your personal 1040 tax form. With this route, the IRS will consider you and your LLC separate entities.
Do you have a multiple-member LLC?
If you started your company with another individual, your taxes will likely be handled similar to those in a partnership. Rather than the company paying its taxes to the IRS itself, you and the other individual involved in your LLC will calculate your shares in the ownership of the company and pay individual amounts. However, the information for the company will be filed on Form 1065, and each person will also use a Schedule K-1. Each person will then file the K-1 with his or her personal tax return.
Don't forget state taxes
It is important to note that the aforementioned information relates to filing your federal taxes for your LLC. You will also need to remember to file your state taxes. In order to do so properly, you will need to gain information on how California state tax laws pertain to your case.
Dealing with any type of taxes can be complicated, and you certainly do not want to put your business at risk by making tax-related mistakes. Fortunately, you can enlist the help of a legal professional who can further explain your taxation options, how your LLC will be taxed and how you can make sure to avoid mistakes and keep thorough records for tax season.