Join Martha Garzon for an in-depth discussion in this video Understanding tax election for LLCs, part of Running a Web Design Business: Defining Your Business Structure.
…In this video we'll examine how LLCs are taxed.…As we talked about earlier in this course,…an LLC business is not considered an independent legal entity.…This means that the business is not taxed separately from its owners.…The IRS by default classifies LLC's, with only one member as…a these regarded entity, and taxes it like a sole proprietorship, and it classifies…LLC's with two or more members as a partnership and taxes it accordingly.…
If an LLC doesn't want to be taxed by this default classification rules,…it can complete and file IRS form 8832, Entity Classification Election,…to elect to be taxed as a C-corporation, a partnership or as a disregarded entity.…On the other hand, for an LLC to be taxed as an S-corporation,…you need to fill out IRS Form 2553, Election by a Small Business Corporation.…
However, before you file form 2553 you need to…be aware that some states don't recognize LLC tax as an S-corp.…You will have to contact your state income tax office and…ask them if S-corp election is available in your area.…
- Understanding your business-structure options
- Choosing your business structure using five key questions
- Establishing business names and fictitious business names
- Obtaining local licenses and permits
- Applying for city/county tax receipts
- Opening a business bank account
- Understanding state and federal taxes
Skill Level Beginner
1. Overview of Business Structures
2. Sample Businesses
3. Forming a Sole Proprietorship
4. Forming a Limited Liability Company (LLC)
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