My husband and i just open the LLC . Both of us a member of that company . How do i file federal tax ?

Question

My husband and i just open the LLC . Both of us a member of that company . How do i file federal tax ?

Answer 1

The simplest way to handle this situation is to treat the LLC as a sole proprietorship and report all of the income and expenses on a Schedule C.  You are only able to do this if you and your husband are the only members of the LLC.  In some states this really makes sense as there are minimum corporate taxes on LLCs not treated as a sole proprietorship.  In my state that is $800 if you have NO tax liability and increases if you do.

Answer 2

An LLC that is not automatically classified as a corporation can file Form 8832 to elect their business entity classification. A business with at least 2 members can choose to be classified as either an association taxable as a corporation or a partnership , and a business entity with a single member can choose to be classified as either an association taxable as a corporation or disregarded as an entity separate from its owner, a “disregarded entity”. The Form 8832 is also filed to change the LLC’s classification

Answer 3

If you and your husband file a joint return and If you do not elect a classification, your LLC will be considered a sole proprietorship, which you will report on Schedule C of your tax return.  You will pay tax at whatever the marginal rate is plus self employment tax.

If you want to avoid the high amount of self employment tax, I suggest, as the other answerers have mentioned, filing Form 8832 and electing to be classified as a corporation.  Then, you will need to file Form 2553 to be treated as an S corporation.  You still need to pay yourself a regular salary, but you can avoid most of the self employment tax.

Of course, evaluate what will cost you the least in the long run.  Just because you pay the least amount of tax doesn't mean you come out ahead in cash.

Answer 4

You must decide how you want to treat your LLC-- as sole proprietorship, or partnership or corporation. May be you have already selected this while opening LLC.

Depending upon partnership or corporation, you will file the tax return.

The partnership files Form 1065 and does not pay any taxes. The profit of a partnership is distributed among the partners. For this the partnership issues Form K-1 to the partners. Partners must include this profit in their own income and on this income pay 15.3% employment taxes.

Corporation files Form 1120 (or 1120S) depending upon C corp or S corp.