![]() ![]() Your LLC doesn’t pay taxes or file federal tax returns. When taxed as a sole proprietor, you and your business are the same for tax purposes. Sole proprietor taxation is the default federal tax treatment for single-member LLCs. Which default tax treatment applies depends on whether the LLC has a single member (owner) or multiple members. When you first form an LLC, it is automatically taxed as a sole proprietorship or partnership. But you have the option of choosing out of the default mode. There is yet another advantage afforded by LLCs: They provide great flexibility when it comes to taxation.Īll LLCs come with a default form of taxation. LLCs owners don’t have to jump through all the legal hoops corporate shareholders must deal with to preserve limited liability.LLCs provide business owners with limited liability from debts and lawsuits, and.Why are LLCs so popular? Two main reasons: The LLC is the most popular business form for small businesses. “LLC” is short for limited liability company.
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