If you currently operate as an LLC, which stands for limited liability company, or as the single owner of a company, chances are you’ll have some questions regarding how your business either is or will be taxed.
Here are three basic things you need to make note of.
This is a point-of-purchase tax that is placed into effect by both local and state governments. This is paid by the purchaser, then small business owners assess, collect, and pass it on to the necessary authorities within a specific amount of time. Both laws and rates vary depending on the actual state.
States taxes are generally paid in the same way the IRS is paid if you own and operate an LLC. This is always done through your individual returns. There are some states who opt to charge an LLC tax on income earned by that particular entity, on top of income tax paid by the members. An annual LLC fee is also often charged by other states.
Owners and members of an LLC are considered to be self-employed, meaning that none of these individuals are subject to any tax withholding. This also means that each and every member is required to pay both self-employment taxes and estimated taxes directly to the IRS and the state tax office. However, the owner of an LLC may be exempt from paying estimated taxes if the LLC has multiple members and the owner doesn’t actively participate in it in either making management decisions or providing any services.
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