There is almost nothing more confusing than the personal tax code, except perhaps the LLC income tax code. Your LLC does not have to pay income taxes, however each member of the LLC does. The amount that must be paid can be based on earnings that have not been realized, however you can modify these ...

There is almost nothing more confusing than the personal tax code, except perhaps the LLC income tax code. Your LLC does not have to pay income taxes, however each member of the LLC does. The amount that must be paid can be based on earnings that have not been realized, however you can modify these amounts if you file the right tax form. It is enough to make a person want to close up shop. When forming a company and deciding whether it will be a limited liability company or a corporation, there are many things that you have to keep in mind, with LLC income tax being one of them.

Anything to do with taxation should be referred to your attorney or your CPA for recommendations, especially if tax code is not your field of expertise. You may be making a killing publishing popular magazines for the local crowd but you do not know the first thing about self employment taxes and which schedule is filed for which type of income. In addition, you should know that some of the tax codes may favor you filing in one way, while other codes may favor something else; you have to be able to weigh your options so that you can take the maximum deductions and take the lightest financial LLC income tax hit at the end of every tax year. 

There are other things to consider about LLC income tax as well. For instance, if you file an amount that is based on your estimated earnings and you fold just at the end of the year, will you still have to file the same form? What if your business goes multinational and you are making money hand over fist; what will that do to your taxation? Of course you will be paying even higher taxes, however will it still be beneficial for you to continue filing as a LLC or would it be better in the long run to go corporate? Again, these are all valid questions that should be fully and completely answered before the new tax year starts. Knowing the options that are available to you will keep you from getting stuck with a bigger tax bill than you should have. After all, if you are not sure about the LLC income tax laws then you cannot possibly be sure that you are paying the right amount at all. 

In the area of LLC income tax, there are several different forms and schedules that must be filled out, depending on the exact situation. You may file a schedule SE, self employment taxes. You may have to file a Schedule C with your 1040 if you are the sole owner of the LLC or a 1065 as an owner in a multi owner LLC. Other forms may be needed as well, making LLC income tax confusing at best. Before you file, make sure that you have all of the documentation that you need; the right figures and that you are actually filing the right form.