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New Member
posted Jun 6, 2019 7:46:18 AM

Thinking of forming an LLC. Currently paying Taxes as Self Employed. What does an LLC Change? More or less Taxes to pay?

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1 Best answer
Level 15
Jun 6, 2019 7:46:20 AM

A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it "passes through" any profits or losses to its partners.

https://www.irs.gov/businesses/small-businesses-self-employed/partnerships 

Also see:

https://www.irs.gov/businesses/small-businesses-self-employed/forming-a-corporation

You and your co-owners should seek out a local professional to help you evaluate your options.

6 Replies
Level 15
Jun 6, 2019 7:46:20 AM

A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it "passes through" any profits or losses to its partners.

https://www.irs.gov/businesses/small-businesses-self-employed/partnerships 

Also see:

https://www.irs.gov/businesses/small-businesses-self-employed/forming-a-corporation

You and your co-owners should seek out a local professional to help you evaluate your options.

Level 9
Jun 6, 2019 7:46:23 AM

If you mean a Single Member LLC (that has not made an election to be taxed as a corporation), it changes nothing for your Federal Income taxes.  So there would not be any tax-purpose of doing that.

Some states (such as California) impose an additional fee for LLCs (California has a minimum $800 fee).


Although a LLC could give some legal protection in case of a lawsuit, most people do not treat LLCs properly for that regard, so the legal protection is minimal or non-existant.  A good insurance policy can give far better protection.

New Member
Jun 6, 2019 7:46:25 AM

No, not a Single Member. Does that change the Tax amount?

Level 15
Jun 6, 2019 7:46:28 AM

An LLC is a legal form of ownership, not a tax one.  Multiple owners are usually a Partnership, whether an LLC or not.

New Member
Jun 6, 2019 7:46:30 AM

That's nice. Does a Partnership pay more than a Self Employed whether an LLC or not?

Level 9
Jun 6, 2019 7:46:33 AM

For the most part, the same thing applies.  It would be the same amount of income tax, but the State may charge an additional fee.