Sole Proprietor to LLC Single Member Questions
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New Member

Sole Proprietor to LLC Single Member Questions

I have been a sole proprieter the last couple years. I now am a single member LLC but I also have a part time job 24.5 hrs per week.

 

I have some questions here.

 

1.How will my taxes be different now?

2. Do I need to file quarterly taxes?

3. If I reinvest 100% of my profit back into my business which is my plan, how do I report that on my taxes so they know I'm not taking in that as income/profit?

9 Replies
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Expert Alumni

Sole Proprietor to LLC Single Member Questions

1. Your single-member LLC is a disregarded entity for tax purposes. So there is no change in tax reporting as you still report your LLC's income and expenses on Schedule C of your personal return.

 

2. If you expect net income (profit) from your LLC, you should pay quarterly estimated taxes. Please read this TurboTax article for more information.

 

3. If you do not withdraw profits from your LLC, there is no specific requirement to report that fact on your tax return. You still have to pay income tax and self-employment tax on the net profit of your LLC whether you withdraw it or reinvest it.

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Level 15

Sole Proprietor to LLC Single Member Questions

 
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Level 15

Sole Proprietor to LLC Single Member Questions

FYI ... be careful in your record keeping ... the business should have it's own bank account and any money you put into the business from your personal funds is NOT considered income to the business ... keep good records of any "funding" you put in  just in case you are audited and have to prove the deposits were not  income to the business ... keep a paper trail of some kind. 

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New Member

Sole Proprietor to LLC Single Member Questions

Thank you!! This helps tremendously.

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New Member

Sole Proprietor to LLC Single Member Questions

Definitely I keep my LLC and personal separate. Its own bank etc. and all records from purchases, sales, deductions etc. But thank you.

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New Member

Sole Proprietor to LLC Single Member Questions

Last question.. I always do my taxes at the end of the year with turbo tax so

1. Can I use turbo tax for quarterly taxes?

2. Do I have to pay for turbo tax each quarter now?

3. What do I need to do if I'm doing quarterly taxes, do I need a special version of turbo tax?

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Level 15

Sole Proprietor to LLC Single Member Questions

Unless your Single Member LLC is signed up as an S corp then nothing has changed for you.  You still file it on Schedule C in your personal 1040 tax return.  The quarterly taxes are just estimated payments you send in instead of withholding like from your job paychecks.  Weren't you sending them in before?

 

Turbo Tax will calculate the 1040ES estimated payments

https://ttlc.intuit.com/community/tax-payments/help/can-turbotax-calculate-next-year-s-federal-estim...

 

You must make quarterly estimated tax payments for the current tax year if both of the following apply:

- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits.

 

- 2. You expect your withholding and credits to be less than the smaller of:

    90% of the tax to be shown on your current year’s tax return, or

  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months).

 

Here are the blank Estimates and instructions…..

http://www.irs.gov/pub/irs-pdf/f1040es.pdf

 

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New Member

Sole Proprietor to LLC Single Member Questions

Thanks and no I wasn't making estimated tax payments I would just pay at the end of the year out my my taxes since I worked a regular job too  and my wife works full time and paid any difference 

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Level 15

Sole Proprietor to LLC Single Member Questions

If you make a lot on your business income you might consider sending in extra during the year so you don't end up owing too much on your tax return.  If you do owe a lot there is an underpayment Penalty for not paying enough during the year.  You can also increase your job withholding to cover the business income instead of sending in extra.  

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