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pmcgrinder
New Member

LLC tax clasification

I have to file a tax classification for my LLC, I am a single member LLC. What is the best choice ?
S- Corporation
C-  Corporation
Pass Through Partnership
Pass Through Sole Proprietorship
1 Best answer

Accepted Solutions
MichaelMc
New Member

LLC tax clasification

"Best" is a question that no one can answer for you. I can tell you that the simplest solution for a single-member LLC is to accept the default classification as a sole proprietorship. A single-member LLC classified as a sole proprietorship is a disregarded entity for tax purposes. You report the LLC's income and expenses on a Schedule C attached to the owner's Form 1040 Individual Income Tax Return. The owner takes the LLC's net profit or loss into account in the determination of taxable income, and pays self-employment (FICA) tax via Schedule SE.

Any of the other options add layers of complexity and cost. The partnership and S Corp classifications are really appropriate for multi-member LLCs. While a single owner C Corp is certainly a feasible possibility, it exposes the business entity's earnings to the possibility of double taxation unless the owner's salary and bonuses are carefully monitored.

I hope this has been helpful and will enable you to make a good choice.

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1 Reply
MichaelMc
New Member

LLC tax clasification

"Best" is a question that no one can answer for you. I can tell you that the simplest solution for a single-member LLC is to accept the default classification as a sole proprietorship. A single-member LLC classified as a sole proprietorship is a disregarded entity for tax purposes. You report the LLC's income and expenses on a Schedule C attached to the owner's Form 1040 Individual Income Tax Return. The owner takes the LLC's net profit or loss into account in the determination of taxable income, and pays self-employment (FICA) tax via Schedule SE.

Any of the other options add layers of complexity and cost. The partnership and S Corp classifications are really appropriate for multi-member LLCs. While a single owner C Corp is certainly a feasible possibility, it exposes the business entity's earnings to the possibility of double taxation unless the owner's salary and bonuses are carefully monitored.

I hope this has been helpful and will enable you to make a good choice.

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