@Djbrevik17 wrote:
can a single owner change from an LLC to a C corp for taxes to keep separate from filing with personal taxes?
Yes, but you will have to file Form 8832 in order to do so.
See https://www.irs.gov/pub/irs-pdf/f8832.pdf
Note that you should seek an in-person consultation with a local tax professional prior to making this decision.
Hi Djbrevik17,
A corporation would be its own entity, beginning the date the C-Corp is formed, not the LLC.
You would need to obtain a new EIN, and as a C-Corp may be responsible for other tax forms and payroll tax forms.
https://www.irs.gov/businesses/small-businesses-self-employed/forming-a-corporation
I hope you find this helpful!
Connie
With only 1 employee (self) how does that work for federal unemployment tax and social security tax? Do I end up paying that twice then once I file my own personal taxes with a 1040?
If you create a C Corp, the C Corp may have payroll, which can include yourself. The C Corp will file payroll reports, including the Form 940 for unemployment and the C Corp pays the unemployment tax.
For the social security tax, the C Corp will file payroll reports, including the Form 941, to submit the social security tax. Half of the social security tax, or 7.65%, is withheld from the employee wages, and the employer (the C Corp) is responsible for the other half of the social security tax, or 7.65%.
You do not pay any social security tax when filing an individual income tax return, only income tax.
Hope you find this helpful!
Connie
does it work like a schedule C essentially... if the C Corp has $0 income after expenses and paying employee (self) then does the company pay $0 tax?
@Djbrevik17 wrote:
Do I end up paying that twice then once I file my own personal taxes with a 1040?
As the sole shareholder in a C corporation, you would be subject to double taxation; once on the net profit when you file the 1120 for the C corporation and again when you withdraw those profits (as dividends) on your 1040.
If you, for whatever reason, need an entity separate from yourself, you might want to look into organizing an S, rather than C, corporation.
Again, you should consult with a local tax professional before making any decisions on this matter.
@Djbrevik17 wrote:
... if the C Corp has $0 income after expenses and paying employee (self) then does the company pay $0 tax?
Yes. Note that the salary is required to be "reasonable".
The C Corp files a Form 1120-C, and if the expenses are equal or greater to the income, there is no taxable income and no tax for the C Corp to pay.
Connie
how is a C corp different than an S corp? I am looking for a way to keep income completely separate from myself
C corporations file Form 1120.
See https://www.irs.gov/instructions/i1120#en_US_2022_publink11455td0e333
S corporations file Form 1120-S and there are a number of differences between an S corporation and a C corporation. However, the primary difference is that an S corporation is a pass-through entity where all of the income, loss, et al, is passed directly through to the shareholder (you) on a Schedule K-1.
S corporations do not pay federal income tax as do C corporations, but S corporations are considered separate entities, unlike sole proprietorships and single-member LLCs.
See https://www.irs.gov/instructions/i1120s#en_US_2021_publink11515kd0e283
@Djbrevik17 wrote:
do I need a new EIN to change to an S Corp?
See https://www.irs.gov/businesses/small-businesses-self-employed/do-you-need-a-new-ein
No, assuming your LLC already has an EIN.
You do need to file Form 2553 with the IRS, however, to make the election.
See https://www.irs.gov/instructions/i2553#idm139855003812896
do you know how I change the LLC to an S-Corp? Is that through the secretary of State?
@Djbrevik17 wrote:
do you know how I change the LLC to an S-Corp? Is that through the secretary of State?
If you simply want to have your single-member LLC treated as an S corporation for federal income tax purposes, then you need to file a Form 2553 with the IRS (link in my previous post).
Otherwise, you need to file articles of incorporation with your state (and presumably dissolve your single-member LLC). Your state has procedures for both and you should consult with a local professional before making a decision.
File form 2553 with the IRS
https://www.irs.gov/pub/irs-pdf/f2553.pdf
Instructions here
https://www.irs.gov/instructions/i2553#idm139855003812896
So do I end up filing taxes under the S corp with the company EIN and then also for myself with my social security number for personal taxes on whatever I paid myself?
@ee-ea wrote:
File form 2553 with the IRS
Again, filing Form 2553 with the IRS is fine if the goal is for the LLC to be treated as an S corporation for federal income purposes, but not for any other purpose (e.g., liability).
@Djbrevik17 wrote:
So do I end up filing taxes under the S corp with the company EIN and then also for myself with my social security number for personal taxes on whatever I paid myself?
Yes. During the process of preparing the 1120-S for the S corporation, a K-1 will be generated.
You will then enter the information from the K-1 into your personal income tax return.