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LLC Tax Question
Posted on 2/25/17 at 9:05 pm
Posted on 2/25/17 at 9:05 pm
Let's say you have an LLC that is making $100,000 per year after expenses.
This LLC is owned by 2 people.
Person 1 has a day job that puts him in the highest tax bracket.
Person 2 is in the lowest tax bracket.
Are they paying different tax rates inside the LLC or is the LLC taxed at a different rate?
This LLC is owned by 2 people.
Person 1 has a day job that puts him in the highest tax bracket.
Person 2 is in the lowest tax bracket.
Are they paying different tax rates inside the LLC or is the LLC taxed at a different rate?
4
Posted on 2/25/17 at 9:09 pm to I Love Bama
I thought LLC members each pay whatever bracket they're in
Posted on 2/25/17 at 9:11 pm to jimbeam
I think you're right. Just want to make sure I wasn't missing something.
This post was edited on 2/25/17 at 9:21 pm
Posted on 2/26/17 at 7:02 am to I Love Bama
An llc is a conduit. No entiry-level income tax. Each member will get a K-1 that feeds into their individual return. They'll be taxed according to their individual tax bracket.
Posted on 2/26/17 at 7:55 am to I Love Bama
An LLC with multiple members can be taxed as a c-corporation, s-corporation, or partnership. The vast majority are taxed as S-corps or partnerships, and the income from those entities flows through to the members on a K-1 form and is taxed at each members personal rate. The C-corp is taxed within the entity and is subject to double taxation as the only way to get money out of the entity is wages or dividends.
I guess my point is - the fact that it is a LLC does not determine the taxation, as an LLC can be taxed various ways depending upon how the entity was created.
I guess my point is - the fact that it is a LLC does not determine the taxation, as an LLC can be taxed various ways depending upon how the entity was created.
This post was edited on 2/26/17 at 8:46 am
Posted on 2/27/17 at 4:32 pm to hedgediver
quote:
An LLC with multiple members can be taxed as a c-corporation, s-corporation, or partnership. The vast majority are taxed as S-corps or partnerships, and the income from those entities flows through to the members on a K-1 form and is taxed at each members personal rate. The C-corp is taxed within the entity and is subject to double taxation as the only way to get money out of the entity is wages or dividends.
I guess my point is - the fact that it is a LLC does not determine the taxation, as an LLC can be taxed various ways depending upon how the entity was created.
This is correct and I want to echo this because this is a common situation I see in my practice.
An "LLC" is a state-level creation. You form an LLC by following the laws of your state.
An "LLC" is NOT in and of itself a taxable entity for federal tax purposes. There is no LLC federal tax return, etc. An LLC must choose to be taxed as an entity (as hedgediver indicated).
Posted on 2/27/17 at 6:07 pm to I Love Bama
LLC should just split income ratably and you both report on your own (pass through taxation), unless you made some other sort of election. Most likely taxed as partnership.
The nature of the income will be treated specifically for the individual as well. Whether it is passive may affect you more than him and vice versa
The nature of the income will be treated specifically for the individual as well. Whether it is passive may affect you more than him and vice versa
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