Single member LLC taxation-

I am trying to figure out how I will be taxed as a single member LLC. Which forms do I need to use? When I pay myself, how much to I need to withhold for income tax? I understand that an LLC can be taxed as a sole proprietor but does that change if I give myself a salary or commission? Will I be taxed on both the profit from the llc and the income that I pay myself? Does that make any sense?

Any insight would be greatly appreciated.
Thank you

Answer by Simon

Let's start from the top down.

As a single member LLC, you can choose to be taxed as a disregarded entity.

This means that you use a Schedule C to report all your income and expenses and arrive at a net profit or loss.

This net profit is what you pay taxes on. Hence, you want to maximize your legitimate business expenses on your Schedule C.

The LLC is not taxed separately as a company at the entity level--that is the purpose of using a pass-through entity like an LLC or partnership instead of a c corporation.

In terms of paying yourself out of LLC profits, the simplest way is to simply write yourself a check.

No payroll, no withholdings.

Now, understand that you will have to make quarterly estimated income tax payments. Everyone makes quarterly estimate income tax payments (it's just as an employee, your employer does it for you, so you don't know that it's happening--except that your paycheck is smaller...)

To figure out the right amount to withhold, it's helpful to use software like Turbotax.

In addition to income tax, you will also report Self-Employment tax. You are required to pay this at the end of the year. It is calculated based on your Schedule C and a separate Schedule for calculating the exact amount of your SE taxes.

So, the forms needed to do your taxes for a single member LLC taxed as a disregarded entity (i.e. as a sole proprietor), you'll need:

* Schedule C
* Schedule SE
* Form 1040
* Your appropriate state tax forms