Small business owners in Florida have a lot more to do when tax season comes around the corner. Some business owners operate as independent contractors while other business owners expand into a limited liability company, better known as an LLC.
For many small business owners, starting an LLC begins after years of working independently or for a different company. Because of that, owners might not know all of the different tax rules and regulations for an LLC versus other business forms.
How are LLCs taxed and treated by the IRS?
Depending on the size of the company and other determining factors, the IRS will treat an LLC as a corporation, partnership or “disregarded entity,” meaning it comes out of the owner’s tax return. Some of the main factors used in this classification are as follows:
– Partnership is an LLC that has at least two members having equal ownership or shares in the business.
– Corporation happens when a company files Form 8832 to be treated as a corporation. This is what larger businesses often choose to do.
– Disregarded entity happens when a sole person claims responsibility and ownership over the LLC.
The IRS might ask the business to provide documentation of its income, resources and expenses to help in these classifications. Owners should keep track of all documentation and make sure there are copies.
How much will you have to pay in taxes?
This depends on how much your business made and how much your business spent. Businesses are responsible for paying or reserving taxes for their employees as well.
Generally, it’s assumed that the more money you make in a year, the more taxes your LLC will have to pay. It’s important to research tax laws for your area as well as keep any and all documentation that will aide in filing taxes on behalf of your LLC.