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By default, LLCs are taxed based on the number of Members (owners). So, the IRS treats an LLC with one Member (a Single-Member LLC) differently than an LLC with two or more Members (a Multi-Member LLC).
If you just apply for an EIN, the IRS will determine your LLC’s tax status based on the number of Members.
Alternatively you can apply for an EIN, and then file Form 8832 (C-Corporation) or Form 2553 (S-Corporation). These forms ask the IRS to tax your LLC as an S-Corporation or C-Corporation instead of the default status.
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Single-Member LLC taxes
Default status: Single-Member LLCs are what’s called a Disregarded Entity. This means The IRS looks at the owner to determine the LLC’s default tax status.
A disregarded entity has “subtypes”. The subtypes depend on who the owner is.
- If the LLC is owned by a US citizen or a US resident, the LLC is taxed like a Sole Proprietorship
- If the LLC is owned by a non-US resident, the LLC is taxed the same way as the individual who is a non-US resident
- If the LLC is owned by another company, the LLC is taxed like a branch/division of the parent company
Elective status: Most Single-Member LLCs can alternatively be taxed as an S-Corporation or C-Corporation. Click the links to read more about the rules and restrictions
Multi-Member LLC taxes
Default status: By default, all Multi-Member LLCs are taxed like a Partnership.
Note: Multi member LLCs are not Disregard Entities.
However if a Multi-Member LLC is owned by a married couple (in a community property state), the LLC can elect to be taxed as a Qualified Joint Venture.
Elective status: Like Single-Member LLCs, Multi-Member LLCs can also be taxed as an S-Corporation or C-Corporation. Click the links to read more about the rules and restrictions.
Both Single-Member LLCs and Multi-Member LLCs have pass-through taxation. This means the profits from the LLC pass-through to the owners’ personal tax return.
LLC Disregarded Entity
You’ll also hear the term “LLC Disregarded Entity” and wonder what this means.
The term “disregarded entity” is only used by the IRS and applies to single-member LLCs (which have not elected to be taxed as a C-Corporation or S-Corporation).
When the IRS “disregards” an LLC, it means that, although the LLC and its owner are separate entities (for liability purposes), the IRS “disregards” them and just taxes the LLC however its owner is taxed. The IRS treats the owner and the LLC as one and the same.
Note: Don’t worry though, this doesn’t affect the asset protection provided by your LLC. For liability purposes, your personal assets will still remain protected.
If the single-member LLC is owned by a person, the disregarded LLC is taxed like a Sole Proprietorship and the owner will report the LLC’s activities on either a Schedule C, Schedule E, and/or a Schedule F.
If a single-member LLC is owned by another company, the disregarded LLC’s activities should be reported on the parent company’s tax return (and marked as a branch or division of the parent company).
Husband and Wife LLC Tax Treatment
By default, the IRS taxes a Husband and Wife LLC as a Partnership just like Multi-Member LLCs. However, they can also elect to be taxed as a Qualified Joint Venture instead.
As a Qualified Joint Venture, the Husband and Wife LLC will be taxed by the IRS as a “single unit”. The spouses only need to file one return, which translates to increased tax savings, reduced accounting fees, record-keeping and other paperwork.
Also, under a Qualified Joint Venture, the husband and wife can get extra credit for social security and Medicare without paying additional taxes.
Very Important Note: Only Husband and Wife LLCs formed in “Community Property” states are eligible to be taxed as Qualified Joint Ventures. These states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
There are additional requirements and restrictions for the Qualified Joint Venture LLC. For more information, please see this lesson: Qualified Joint Venture.
LLC Taxed as Sole Proprietorship
This is the default IRS tax classification for single-member LLCs.
You don’t need to file anything with the IRS in order to make this election.
For federal tax purposes, the profits and losses of the LLC “flow through” to the owner’s individual personal income return (Form 1040).
For more information, please see LLC taxed as Sole Proprietorship.
LLC Taxed as a Partnership
This is the default IRS tax classification for multi-member LLCs.
You do not need to file anything with the IRS in order to make this election. For federal tax purposes, the profits and losses of the LLC “flow through” to the owner’s individual personal income return (Form 1040).
The LLC must also file a 1065 partnership return as well as provide K-1s to each of the LLC’s members.
For more information, please see LLC taxed as a Partnership.
LLC Taxed as an S-Corporation
This section is written in the context of single-member LLCs taxed as an S-Corp (as it’s easier to understand), but the same concept applies to multi-member LLCs taxed as an S-Corp.
An LLC doesn’t need to keep its default tax classification with the IRS. If an LLC would like to be taxed as an S-Corporation, it must file Form 2553.
(related article: instructions for LLC taxed as S-Corp)
The biggest advantage of a single-member LLC taxed as an S-Corp is how the owner will pay self-employment taxes (social security and medicare taxes).
The owner of an LLC taxed as a Sole Proprietorship will pay self-employment taxes on all profits in the company. For simplicity, self-employment taxes are 15.3% of net income (income after expenses). So if a single-member LLC has $100,000 in net income, the owner will pay $15,300 in self-employment tax.
With an LLC taxed as an S-Corp, the owner also becomes an employee of the company and must take a reasonable salary. That reasonable salary is subject to the 15.3% self-employment tax, but the leftover profits (called distributions) are not subject to self-employment taxes.
So for this example, if the LLC has $100,000 in net income, but the owner takes a $60,000 salary, the owner will only pay $9,180 in self-employment tax ($60,000 x 15.3%). The remaining $40,000 is not subject to self-employment tax (for a savings of $6,120).
Now, it’s not all pure tax savings. The LLC owner will incur additional expenses being taxed as an S-Corporation. These include payroll processing, payroll tax returns, additional bookkeeping, accounting fees, and filing Form 1120-S corporate tax return. These expenses can range from $1,500 to $2,500 so there will usually still be self-employment tax savings for LLCs with net income of at least $75,000 to $80,000. Of course, the higher your profits, the higher your tax savings.
There are additional advantages and disadvantages not covered in this brief overview so make sure to speak to your accountant before making any changes to your LLC’s tax classification.
LLC Taxed as a C-Corporation
An LLC doesn’t have to keep its default tax classification with the IRS. If an LLC would like to be taxed as a C-Corporation, it must file Form 8832.
(related article: LLC taxed as a C-Corp)
Note: LLCs taxed as C-Corps are not that common and usually only apply to a small range of business owners. We are including this information for reference, but please speak with an accountant about the best tax classification for your LLC.
An advantage of an LLC taxed as a C-Corp is something called “income splitting”. This is when a business owner makes enough money that they can leave some in the business. They take a reasonable salary, but not such a big salary that it completely eliminates the company’s profits. By “splitting the income”, an owner can keep themselves in a lower tax bracket. However, this strategy is not for the inexperienced. You’ll need to work with your tax professional closely to make sure you do not become subject to the Accumulated Earnings Tax (for leaving profits in the company for too long).
The biggest disadvantage of an LLC taxed as a C-Corp is what’s known as “double taxation”. Unlike a pass through entity (LLC taxed as Sole Proprietorship, LLC taxed as Partnership, and LLC taxed as S-Corporation), an LLC with C-Corp tax classification must file a return federally with the IRS and the owners must also file federally with the IRS. This means you are taxed on the corporate level as well as the personal level.
There are other advantages and disadvantages not listed above, but we are keeping this section as a brief overview since 95% of our readers do not benefit from having their LLCs taxed as C-Corporations. This type of taxation usually applies to much larger and sophisticated businesses; not small business owners.
69 comments on “How are LLCs taxed”
Disclaimer: Nothing on this page shall be interpreted as legal or tax advice. Rules and regulations vary by location. They also change over time and are specific to your situation. Furthermore, this comment section is provided so people can share their thoughts and experience. Please consult a licensed professional if you have legal or tax questions.
Hi, Please help me answer these questions below that I am concerned about:
I already filed a LLC in Nevada on May 2022 and also filed and received an EIN number, but as of today we did not have any income, so my questions are:
– Do I need to file the federal income tax for the year of 2022 or not;
– Do I need to file the form 2553 (Election by a small Business Corporation) now, or just wait until I file the taxes for the year of 2023.
Any feedback from you will be highly appreciated.
Thank you for your time.
Hi Tony, if you don’t have income, I would not recommend having your LLC taxed as an S-Corporation (by using Form 2553). How many LLC owners are there? Are they US citizens?
Thanks for kind information its really very helpful. I want to ask you ” How Can I register LLC on the base of local entity instead of individual” ?What will be the requirements? Your response very appreciated . Thanks
It sounds like you want the LLC to be owned by another company and not you personally. If so, it depends on the state. If the state’s Articles of Organization paperwork ask for Members, you’ll list the parent company. And you’ll also list the parent company as 100% owner in the LLC Operating Agreement. If the state’s Articles of Organization paperwork doesn’t ask for Members, then you’ll just list the parent company as 100% owner in the LLC Operating Agreement. Hope that helps.
Glad that I found this article – the first one I have found that helps work towards what I need to do.
I have a few single-member LLC’s owned by another company. Based on your article, I forwarded a few accountants your comment that the disregarded LLC’s activities should be reported on the parent company’s tax return (and marked as a branch or division of the parent company).
This didn’t seem to help them and can’t find anyone willing to do the returns, so am looking at doing this myself.
However, I can’t quite work out or determine how I report the disregarded LLC’s activity as a branch or division. Any further information you may have on this?
Hi Nathan, we don’t file our own returns, so can’t comment on exactly where this is done, however, this is fairly common. I recommend speaking to a few more accountants.
I’m in Texas and just formed an LLC with my husband. We applied for an EIN and selected “disregarded entity” status. Still a little confused by this but seems that just treats us a single member or sole prop and we file with our 1040/Schedule C.
So for formation and record keeping, what do you recommend? Do we need a separate bank account and keep business records like a regular business in Quickbooks etc? We formed the LLC to invest in properties and are working on our first deal. The down payment funds are just sitting in our personal bank account. Should I just open a bank account with $100 contribution each and then keep things separate and move all our house purchase funds into the account? I want to get things right from the start. I hate bookkeeping. Lol. Thanks for all the references here.
Hi Deanne, if you already use Quickbooks, then yes, that is a great idea (you’re far ahead of most people with bookkeeping). Let me back up a little bit and address something. Have you spoken with the lender about taking title in the LLC name? I’ll address the other questions in another reply. Just wanted to address that first.
Hi Matt, You’ve heard this before but this website is awesome ! Nothing better online on how to navigate an LLC. My questions are – when creating an LLC, is there an advantage to adding my wife as a “member” vs having it be a single member and having my wife as an employee – I’m thinking about a couple things 1) the Qualified joint Venture sounds interesting and I understand the benefits from your site but 1) how does the employment tax thing work if I were a single member LLC with my wife as an employee vs a 2 member LLC with me and wife as the two members ? 2) If I want to set aside earnings to fund a 401K – is it different if the person funding the 401k is a member or an employee ? ( kind of same question about single member LLC with wife as employee vs 2 member with wife and husband as the members – for 401k funding purposes ? Today we do file jointly. Thanks a bunch.
Hi Steve, hearing it never gets old ;) Thank you! This is a great question. There’s actually a bit to unpack here and it’s really a tax-based question that is best addressed with an accountant. There can certainly be tax and retirement benefits for how you structure things. We recommend calling a few accountants to discuss the details. Thank you for your understanding.
What happens if a person owes federal taxes and they created a LLC (Limited Liability)?
What does Limited Liability means?
What is the difference between registered agent address and agent address?
With the 2 different address meanings do that mean your home is being used as a business?
Hi Patrice, the LLC offers liability protection for personal assets. That liability protection doesn’t extend to federal taxes. An “agent address” is the same thing as a “Registered Agent address”. Registered Agent address is more accurate. And no, just having your home address as the LLC Registered Agent address doesn’t mean you are using your home for business. You are using your home for business if you are actually using your home for business. Hope that helps.
Thanks very much
Hi Matt, if I have a parent/child entity structure, where both entities are LLC’s (not electing s-corp status), do I need to fill out a 1040 Schedule C for each entity, or only for the parent? If I only need to file a Schedule C for the parent, are there any filing requirements for the child entity?
Hi Jamie, we can’t answer in super specific details we are are not a tax firm (we recommend speaking to an accountant). However, the Child LLC is taxed as Disregarded Entity in this setup and is therefore taxed as a “branch/division” of the Parent LLC. It’s just the Parent LLC that files a return. Hope that helps.
I’ve heard that a sole-proprietor LLC’s EIN is tied to the proprietor’s social/credit score.
Is it true that in a Multi member LLC the EIN will not be directly tied to any of the members but rather the company as a whole?
If that is the case, is it enough just to refile the articles of organization with the new member/s? Or is it necessary to get a brand new EIN? And if so, how can this be done?
Hi Ben, by itself, the EIN doesn’t affect the single member’s credit score. If you apply for a business credit card or some other type of business financing using both the LLC’s EIN and your SSN, depending on the terms you agree to (there could be a personal guarantee), then that business activity could affect your personal credit score. Initially in a Multi-Member LLC, there is one EIN Responsible Party for the LLC, however, after the 1065 Partnership return is filed, the IRS knows which SSNs/ITINs are connected with the LLC. I don’t understand your question about “is it enough…” as it’s incomplete as written. Can you please rephrase your question?
If my LLC is set up as a Multi-Member LLC but currently there is only one owner (me) and the EIN is created under this premise (i.e. sole member LLC), what are the tax implications here?
Hi Chase, do you mean that you first formed an LLC with 2 people and that 2nd person has since transferred all of their ownership to you? If that’s the case, you’ll need to file Form 8832 with the IRS and change the LLC’s tax classification from an LLC taxed as a Partnership to an LLC taxed as a Sole Proprietorship. So for #6 in Form 8832, you would choose “A domestic eligible entity with a single owner electing to be disregarded as a separate entity“.
You will also want to remove them from your LLC bank account and update the state Department of Revenue (or equivalent state agency). Please also speak with an accountant, as the LLC may still need to file a 1065 Partnership Return and issue K-1s to “close out” the last tax year of the Partnership. Hope that helps.
Thanks for the quick reply! The LLC was declared with the Secretary of State as a multiple owner LLC but that second owner was not declared nor will be by the end of the year and the EIN was requested as a sole owner. Would I still need to file Form 8832 if this is the case?
You’re welcome Chase. I see. If the EIN was requested as a sole owner, then no, you don’t need to file Form 8832 with the IRS. If the 2nd Member is listed in the LLC’s Articles of Organization (or Certificate of Organization or Certificate of Formation), you’ll want to file an Amendment with the Secretary of State. Did you ever sign an Operating Agreement with this person?
Ok perfect. Makes sense. And no, the 2nd Member isn’t listed on the Articles of Organization nor is tied contractually through an Operating Agreement. By all intents and purposes, they are not affiliated with the company at all.
Okay, I see. If the Articles of Organization states Multi-Member LLC, you can file an Amendment to change that.
You give confidence to non-resident people like us. Thanks for this useful website.
My question is this: I set up an LLC in Delaware this time last year. Afterward, I did not take any action because I had a problem with my Amazon account, but I paid the franchise tax in January 2020. I did not make any statements as there was no activity on my Amazon account and the Payoneer it is linked to. Will this be a problem for me?
Hi Yasin, that is great to hear! You’re very welcome :) Are you the only owner of the LLC or do you have another partner/owner in the LLC?
Thanks, Matt :)
I am the only owner. I don’t have any partners.
Hi Yasin, you’re welcome :) You’ll want to file Form 5472 by April 15th every year. It’s an informational return that needs to be filed with the IRS.
If I set up a DBA under my LLC, can I use a different EIN from the LLC?
Hi Selena, no. There is just one entity here (the LLC), and any activities that take place in a DBA would still be reported under the LLC’s EIN. Hope that helps.
Thanks so much for all the information here, it’s been amazingly helpful in setting up our California multi member LLC! I have a quick question in regard to tax deductions. I read that single member LLCs are able to deduct all initial fees associated with forming the LLC as well as the $800 franchise tax board fee. Would this be the case for multi member LLCs as well? If it matters, there are 2 of us and the business is set up as an even 50/50 split. Thanks so much!
Hey Nick! You’re very welcome :) Yes, a Multi-Member LLC will also be able to deduct startup expenses, including the franchise tax payment. If you are forming an LLC in California, due to changes in the law (Assembly Bill 85), we recommend waiting until January 2021 or filing online now, but using a “future file date” of January 1st, 2021. This will save you $800 in 2021. Hope that helps.
That’s super helpful, thanks so much!
Hi Matt! I wonder what kind of tax that the LLC formed by a non US resident has to pay? and when? I have email to many cpa websites and they don’t seem to reply at all.
Hi Roth, it’s not a simple answer as depends on multiple factors. We recommend reaching out to Gary at GW Carter. They specialize in working with non-US residents with US LLCs. Hope that helps!
My siblings and I created a Missouri LLC to hold real property we are jointly inheriting. The grantor requires our inheritances to be held in trust. Can the members of an LLC be the trusts? Or must the members be actual persons?
Hi Julie, a Trust can be an LLC Member. If the deed is transferred to the Trust first, if allowed by the Trust, you’ll need to transfer the property again from the Trust to the LLC. Hope that helps.
Matt, thanks for the answer about allowing a Trust to be a member of the LLC. If all the members of the LLC are Trusts, who is the Responsible Party for the EIN? One of The Trustees?
The Trusts and the LLC were formed in MO. The LLC Managers are Trustees who reside in CA, but two other Trustees reside in MO and FL. We’ll register in CA as a foreign entity.
We’d like to have the business address for the Trusts, and the LLC and the EINs for the Trusts and the LLC, be a California USPS post office street address.
We have a MO registered agent for the LLC.
Yeah, we may need to find legal counsel for this!
Hi Julie, if the Grantor is alive, they can be the EIN Responsible Party for the LLC. If the Grantor is deceased, then a Trustee can be the EIN Responsible Party for the LLC. Yes, a lot of moving pieces here. I think it would be a good idea to speak to an estate planning attorney who is familiar with business law. Hope that helps :)
Matt, I believe the earnings for LLC will be $1000 / month. In this case I want to contribute to social security / medicare etc. So what is your advice? I just registered the LLC (thru Northwest). Should I have chosen any options such as S-Corp or can I later fill a form with IRS to indicate the s-corp?
Hi Lavan, you’ll still pay into Social Security and Medicare with an LLC taxed in its default classification (Single-Member LLC taxed as Sole Proprietorship or Multi-Member LLC taxed as Partnership). Typically, you’ll want net income to much higher than that to justify the costs of having an LLC taxed as an S-Corp. And ultimately, you’ll want to have a conversation with an accountant (or a few) regarding the best election. And yes, you can elect to have your LLC taxed as an S-Corp at any time in the future, even years down the road. Hope that helps!
Matt, Awesome. Good to know that the default LLC will be taxed such that I could contribute towards Soc Security and Medicare. Thanks for the clarifications and so I don’t have to do the S-Corp taxation. Makes sense.
Do you have a ball park of what income level and upwards is a better way to be s-corp tax reported?
Secondly, does LLC by woman have any advantage in tax or in any other ways.
Thank you as always and you are doing a great job.
Hi Lavan, there are not federal tax advantages to an LLC that is owned by a woman, however, there are often local programs that have benefits for female-owned businesses. We’re not familiar with the details though. For a Single-Member LLC, we typically recommend net income be between $70k and $100k. Our LLC taxed as an S-Corp article (linked above in the prior reply) goes into more details about that. In short, since it costs money to maintain an S-Corp, file payroll, and work with an accountant and/or bookkeeper, you want to make sure that those extra costs are justified by the self-employment tax savings. Hope that helps.
I have four questions:
(1) May I provide an address of a registered agent for service as an address of LLC for registration purposes if all members are non-US residents? We do not plan to have any office or employees.
(2) As I understand, each member has to pay 15.3% self-employment federal tax as S-Corporation for tax purposes. What if one of the members is foreign (European) company entity? What federal tax should it pay?
(3) Is it prudent to register LLC in Wyoming if we are planning software licensing across the states with no relation to any particular state?
(4) What state tax have we pay in Wyoming?
Hey Alexandra, it depends on the Registered Agent company you choose. If you go to our homepage, select the state, then click on Registered Agent, you’ll see recommendations for this specifically. Taxes can be very detailed. It depends on the industry and the county’s tax treaty with the US. It’s best to speak to an accountant about your your tax questions. Hope that helps.
I have established a virtual mailbox in San Francisco to receive mail for my LLC. Will I have to pay city taxes as a business because that’s where my mailbox is, even if I do not live or operate at that street address? Thanks!
Hi Michelle, you would need to run this by an accountant. Thank you.
Hi Matt! Thanks for the article. But I need your help so much with my question… I wanna start my online e-commerce with Shopify platform (I’ll sell different stuff worldwide online – dropshipping) and also to get payments from customers I need to set up payment gateway Stripe. Stripe isn’t available in my country, so I have to open US LLC (most likely I’ll register an LLC in Wyoming), then apply for an EIN to provide this info for Stripe so they can verify me. And I’m currently struggling with taxes. I don’t know am I bound to pay any taxes to the US or my home country or not. I’ll be a non-US resident, Single Member LLC (Disregarded Entity). I don’t have any employee in the US. And many people tell different thing so I don’t know the 100% answer about am I bound to pay any taxes or not. Hope you can clarify that for me and I finally will start my business cause this question is stopping me from it.
Hi Yaroslav, it’s complex and varies a lot depending on the tax treaty and the details of your situation. You’ll want to have a few conversations with an accountant. We do have some articles that you’ll find helpful:
• how to get an EIN without an SSN or ITIN
• how foreigner can open U.S. LLC bank account
• foreign-owned single-member U.S. LLC and Form 5472
Hi Matt, is it possible to report taxes different one year (for example as partnership one year) and the next one another one (for example as S-Corp)? Another thing, I see Arizona has $0 fee and no annual report, why there’s some people who suggest Wyoming or Delaware instead?
Thanks for your help. Your insights have been a great help.
You’re welcome Robert!
Hi Matt. I am in the process of starting a multi-member LLC, but have concerns about the tax liability. If one of the members in my LLC owe debt to the IRS that I don’t know about, can I and the other members be held liable for those debts? Can the LLC be held liable?
Hi Robert, it might be a good idea to speak with a tax attorney to dive into details, but from what you’ve shared, just because you form an LLC with someone doesn’t make you (or the LLC) liable for their personal debt. That’s a separate, disconnected issue. Hope that helps.
Just want to thank you for providing such a valuable information.
Thanks Heenaah! You’re very welcome :)
Hi there I have a question , is a sole proprietor & a LLC ( one member ) taxed the same way ? ( Can they both do business deductions etc ? )
I am trying to figure out which to start my online store as , i do not have anything under my name so i believe i don’t need the financial protection until my business grows . Can you help , please
Hi Melinda, yes, a Single-Member LLC is taxed like a Sole Proprietorship, so the taxes are filed and paid in the same manner as a regular Sole Proprietorship. More info here: Sole Proprietorship vs LLC. Hope that helps.
Hi Matt, I am a Non-US resident, if I file my LLC, and hired a commercial registered agent, will I have monthly or annual fees? If there’s any, will it be for the registered agent I hired or for the LLC taxes?
Hi Zheen, most Registered Agents charge annually. What state did you form the LLC in? Your tax responsibilities will be your requirement to take care of work with an accountant on. The Registered Agent and the state will not be notifying you to pay your taxes.
Thanks for your great help to the LLC beginners & Owners, via this LLC University. It means a lot to people like me.
I have couple of questions around EIN.
As LLC is a disregarded entity from the IRS perspective and also LLC not necessarily need an EIN, if in case LLC gets an EIN:
1. Are the taxes still paid through personal tax returns i.e. Schedule C? or does EIN obligates the LLC to make separate corporate tax returns?
2. Usually if LLC doesn’t make any income in any particular year, it doesn’t need to be included in Schedule C, correct? Does condition change if LLC has EIN with have no income.
Appreciate your help
Hey SJK, thanks for the kind words! 1.) Yes, a single-member LLC (with an EIN) is taxed as a Sole Proprietorship and files income/losses/deductions/credits on their personal 1040 return, on a Schedule C and any other applicable schedules and forms. 2.) Correct. Doesn’t make a difference if the LLC has an EIN or not. Hope that helps.
Quick question for you… if I have a tax hold back (I don’t get my return at the moment) and I file taxes under my LLC as a Sole using the EIN and my SS?, what happens to the return that would be due back to the Company\me? I’m trying to figure out if the S Corp is the way to best manage this or if it makes no difference. Thank you and I’ve certainly learned lots from your great responses and everyone’s equally good questions. Super helpful web site!
Hey Robert, awesome to hear! Thanks for the kind words. I don’t know the answer to this one. Apologies I couldn’t be of more service here, but I recommend speaking with an accountant. Hope that helps, somewhat ;)
My husband’s freelancing is officially recognized as a (single member) LLC as of Jan 3rd, 2018. I understand that since it’s is a disregarded entity, we file income/loss through our personal 1040 tax return. Since the LLC didn’t technically start til 2018, when we fill out the 2017 Schedule C, do we include the business name (line C) and EIN (line D)? Or do we leave that blank, since the LLC wasn’t technically registered until 2018? Thanks for your help!
Hi Leyla, we can’t inform exactly how to complete a tax return (we recommend speaking with an accountant), however, you should’t be filing a 2017 return with the LLC name since the LLC didn’t exist or do business in 2017. Hope that helps.
Can a non USA resident form an LLC for the purposes of selling online where goods would be stored in a USA warehouse e.g Amazon FBA warehouse . If the answer is Yes then which state is the best state to do this in?
Hey Lennox, yes, a non-US resident can form an LLC in the US for an online Amazon FBA business. Do you have any friends or family in the US? Is there a state you visit often? What country are living in now? Will you have an actual office in any state? Will you have local employees in the US? Let me know the answers to these questions, and I should be able to help guide you further.
Hi Matt, First of All, thumbs up for great articles throughout your website. I am a Non-US, planning to form single member LLC, for Amazon FBA, in WY (due to low tax/cost), but have a friend in NJ for bank a/c opening. I will use regtd. agent address for LLC and friend’s address of NJ for Amazon id & work over internet. I am a bit concerned over sales tax filings as to how wud i do that. Tried to find few accountants using your “how to find an accountant” but didnt got great help. My questions were (below). Can u help me in them?
-Do u deal currently with any client i.e. single member LLC (manager managed) selling on Amazon? Where are they registered?
-What are my filing requirements as a single member LLC (manager managed) selling on Amazon?
-under my condition (non-US) Which one is better, Delaware or WY? from sales tax & state tax perspective?
-In WY, Sales tax is applicable but on internet / Amazon seller (under LLC) isnt sales tax exempt (as I’ve heard that 1$Million below gross annual sales is exempt from Sales tax)
-For sales tax, what permit/registration is required separately or not? When is the sales tax filed
-Is there any exemption for Non-US holders of single member LLC on Federal income tax or sales tax?
-qoutation for monthly bookkeeping, sales tax filing & annual report +annual income tax (i.e. form-c)
Hi Malick, thanks for the kind words! You won’t be able to open a bank account in New Jersey for your Wyoming LLC unless you either register your Wyoming LLC as a Foreign LLC in New Jersey or you do a “cross branch opening” where you coordinate opening a Wyoming bank account with a bank located in both Wyoming and New Jersey. I appreciate you neatly laying out questions, but they are not something we can answer. This is all taxation-based and will be unique to your situation. You’ll need to continue on your search for an accountant. One who can not only only help answer your questions, but one who can also prepare your returns as well as answer your questions throughout the year. Keep searching. It does take time and effort, but you’ll soon find a solid accountant. Best wishes :)