Hi Abe! I am getting ready to sign a contract to act as a lease operator under a Limited Liability Company (LLC). Will I have to file and pay business taxes now under my LLC?
Great Question! A Single-Member LLC is regarded as a disregarded business entity. What this means is that the business itself will not have to file or pay a business income tax operating under a Single-Member LLC. You will file the 1099-NEC you receive alongside any additional tax documents you might receive such as a W-2, 1099-INT, 1099-DIV, etc.
Many people assume because the Single-Member LLC is regarded as a separate business entity that it must pay business taxes, but this is incorrect. Other business structures such as a Partnership LLC or an S-Corporation will have additional tax filing responsibilities as part of the structuring of the business. Sole Proprietorship and Single-Member LLCs are exempt from additional filing responsibilities.
For tax purposes, the LLC will be treated the same as a Sole Proprietorship. However, unlike the Sole Proprietorship, the LLC does allow you to establish separate bank accounts and then help manage the separation between personal assets and business assets to help reduce personal liability.
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