There are many different taxing options for people who run businesses. One such example is an LLC, which is short for Limited Liability Corporation. This common organizational structure is used by many small businesses. However, having an LLC can impact your overall tax situation and liability. It can also impact how states like New York determine your taxes. Thus, it is worth examining how the IRS treats an LLC.
How does the IRS look at my LLC?
From a business and commercial law perspective, an LLC is treated very similarly to personal taxes. Each owner is expected to show their share of the income from an LLC and then adjust their tax rate accordingly. There are, of course, different forms that are required, depending on the type of LLC, the state in which it is located, and what the overall income is. An LLC may be used for the purposes of business deductions and tax credits as well, so those should be examined by a tax professional in order to determine the appropriate way to file.
It is also worth noting that LLCs can vary widely in size and scope. Some people use an LLC for side gigs in order to protect their personal assets, while others use one as essentially their main source of income. This wide variance can result in different tax treatments, and it may be worth consulting a legal counselor for additional advice.
If you have any legal questions about an LLC or how it may affect your taxes, your best bet is always to connect with a knowledgeable accounting or legal professional. Tax law can get extremely complicated, and the penalties for making tax errors can be severe, so it is better to resolve these issues before you file your taxes rather than after you hear from the IRS.