new LLC

[bethlauren04]

Hello

I have been working as an independent contractor for a few years now. I had a business set up, however, it was just this year (in 2023) that I turned it into an LLC. I was previously filing one tax return, but I would like to for this year file one for the business and a separate one for myself as a 1099 contractor working for the LLC. I have no other employees (other than myself).

1. My understanding is that I have the option to still file only one tax return (for myself and the business together) since I am the only owner of the business. Is that correct? 

2. If I choose to file a separate personal and then one for the business, do I pay double taxes? 

Note I live in GA and the business operates from  GA. It is a consulting business. 

Thank you

[conniem123]

Hi bethlauren04,

Thank you for your questions today.

I understand that in previous years you filed a Schedule C for your self-employed business.  Now in 2023 you have established a LLC. 

1.  A single member LLC is the same as being self-employed, and file the Schedule C.  If you are a single member LLC you will continue to report your business income and business expenses on a Schedule C, as part of your individual income tax return.

2.  To file a separate tax return, you would need to elect with the IRS to be treated as a S-Corp and would the S-Corp would then file a Form 1120-S.  An S-Corp is a pass-through entity, it does not pay taxes, but passes it's profit/loss through to its shareholders via a Schedule K-1 for the shareholder(s), you, to include on your individual income tax return.  So there is no paying double taxes, as the S-Corp does not pay taxes.

I hope that this information is helpful.  Have a great day!

Connie

[bethlauren04]

Thank you. 

So if I want to keep my personal taxes separate, I would need to make the business an S corp? 

Would i be able to treat my personal income as a 1099 contractor, and then file for the S corp separately. 

Is an S corp taxed at a higher rate than an LLC? 

[MarthaT]

Congratulations on your new LLC.  As my colleague said you would need to report your LLC in schedule C unless you make the election to S-corp.  Either/or you need to be ready and pay estimated taxes to avoid pentalties.  You can use the tax calculator at https://turbotax.intuit.com/tax-tools/

Thank you so much again for your question

[conniem123]

Hi,

Great questions!

Making your business a S-Corp will NOT keep your taxes separate.  A S-Corp files their own tax return, but does not pay taxes.  The S-Corp profit/loss "passes through" to the shareholder, you, to report on your individual income tax return.

You will not want to pay yourself.  You pay tax on the business profit, and take out money as distributions.  You do not report the distributions on your individual income tax return, as you have already paid tax on the business profit.  

An S-Corp is not taxed at a higher rate, as a S-Corp does not pay tax.  The profit passes through to the individual to pay tax on their individual income tax return, at the individual tax rate.

I hope this information is helpful!

Connie