Knowing how to file your taxes is simpler than it sounds and whether it’s a person or a business, we all have to file taxes. Here’s how you can file your LLC and personal taxes together.
An LLC is a business structure that combines the limited liability protection of a corporation with the structure flexibility of a partnership. Most LLCs are either taxed as disregarded entities or as partnerships and are therefore subject to pass-through taxation, meaning business profits and losses are passed onto owners, known as members, who then report these amounts directly on their personal tax returns. However, this is not always the case.
The tax designation and the ownership structure of an LLC will determine whether you are able to file your LLC taxes together with your personal taxes.
Consider Your Ownership Structure And Tax Designation
Single-member LLCs are taxed disregarded entities, owners therefore report and pay taxes on their business profit which they submit alongside their personal tax returns. Single-member LLC owners can simultaneously report their business profits and deductible expenses on their personal tax returns.
Multi-member LLCs are taxed as partnerships and therefore report their total business income but not for tax-paying purpose, while each member reports and pays taxes on their individual share of the business profits. Their share of the business profit is also submitted with their personal tax returns.
LLCs that choose to be taxed as a S-corp follow very similar protocol to LLC that are taxed as partnerships. Owners of LLCs that are taxed as an S-corp are required to report their portion of the business as well as their personal tax returns. The only difference comes in when shareholders are also employees of the LLC. In such cases, shareholder-employees must be paid a reasonable salary before distributions are made to shareholders and they are taxed on both types of earnings.
With single-member LLcs, multi-member LLCs and LLCs that elect an S-corp tax designation, the business is not a separate tax-payer from the owner, they stand together as one tax-payer. In such cases, business profits are taxed at individual tax rates, rather than at corporate tax rates.
The Odd One Out
When LLCs elect to be taxed as an C-corp is the only time the IRS regards a business as a separate tax-payer from its owners. LLCs that elect to be taxed as an C-corp are required to pay corporate tax on business profits before passing on earnings to shareholders by means of dividends. Shareholders who participate in the management structure of the LLC are also considered employees, and as with LLCs who elect the S-corp tax designation, they will be taxed both on their income and their dividend earnings.
LCCs that choose to be taxed as an C-corp are subjected to corporate taxes, owners do not report their business income on their personal tax returns but are required to report their dividend incomes on their personal taxes.
The Bottom Line
When deciding whether or not to file your LLC taxes together with your personal taxes the key word is “pass-through entities”. Most LLCs are considered pass-through entities because business profits are passed on, reported and taxed on the owner or shareholder’s personal tax returns. Single-member LLCs, multi-member LLCs and LLCs who elect a S-cop tax designation are all regarded as pass-through entities, although few are required to report their business income however not for pay-paying purposes. In all cases, owners can file the LLC taxes together with their personal taxes.
It is only LLCs who elect the C-corp tax designation that are not regarded as pass-through entities, they are considered legally separate from the owner and owners are therefore required to file their LLC taxes separately from their personal tax returns.
Need Some Help?
If you want to know more about how you can file taxes for your LLC, TRUiC can be of great assistance for those of you who want more details. Knowing when you are able to file your LLC taxes together with your personal taxes is all about understanding how the ownership structure of your LLC and choosing the right tax designation will impact how you can file your LLC’s taxes.