Surprise surprise, for every different kind of LLC, there are also different taxes. It’s important for you to know the different taxes for each kind of LLC. You want to keep your friends at the IRS on your good side, don’t you?
Let’s go over the different kinds of LLCs, along with the taxes you have to pay for each particular LLC.
The Single-Member LLC
The single-member LLC is an LLC with only one member, as its name suggests. The single-member LLC will always have pass-through tax treatment. This means that instead of having to pay the 39.1% corporate tax, you can include the profits of your LLC on your personal income taxes.
A Married Couple LLC
A married couple LLC is an LLC whose only members are two people who are married to each other. A married couple LLC will usually have pass-through tax treatment. But this isn’t the case if the LLC is formed in a community property state.
If your LLC is formed in a community property state, you will have to file a partnership tax return for your LLC. As of 2018, the following states have community property laws: Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin.
If you file a partnership return, you and your spouse will have to include your respective share of the profits on your income taxes.
If your LLC has two members that aren’t married, then it’s considered a multi-member LLC. A multi-member LLC receives pass-through tax treatment. Each member will claim his or her share of the LLC’s profits on their respective personal tax returns.
The Series LLC
If you’ve read my blog before, you may already know a bit about the Series LLC. The Series LLC allows you to create as many “series” as you want. They operate directly under your original LLC, but are treated separately for liability purposes. When it comes to paying taxes with an LLC, things can get tricky.
For example, in California, each series in a Series LLC will have to pay an $800 franchise tax. But in Delaware, no matter how many series you have in your Series LLC, you’d only pay the $300 franchise tax one time.
Because the Series LLC is fairly new, most states allow you to choose the way it gets taxed. Although as new laws get passed, this may or may not change from state to state.
If you have any questions about the tax treatment of LLC’s feel free to ask me in the comments below, I’d be glad to help you! In the meantime, check out our previous posts to learn more about pass through tax treatment.
If you need advice on forming your LLC or paying its taxes, schedule your personal consultation now.