LLC Taxation Options
LLC Taxation is a necessary and important aspect of a Limited Liability Company.
LLC Taxation is the way you get to pick how your entity is taxed. There are four types of LLC taxation to choose from within the “check-the-box taxation.” Knowing which taxation to choose will help you start your LLC on a solid foundation.
We want to help you navigate and choose the best LLC Taxation for your company. Here are the four LLC taxations choices to choose from:
- S Corp (I started with the best
- C Corp
- Sole proprietorship
C Corporation for Taxation
C Corporation Taxation is for Large Corporations. Income is withheld year to year for retained earnings. This type of entity is for a specific purpose, which most likely does not apply to you unless you are taking your business public or selling shares to investors. If you are looking at taking investors, call us – we have much to talk about!
S Corp Taxations
S Corporation Taxation gives you an advantage to having an LLC. The S Corp is the small business version of the C Corp with pass through taxation. You take all of the profits outside of expenses and transfer it to your personal funds to receive the best tax savings available. Your S Corp won’t owe income tax, and you will file a special tax return that is informational. The LLC isn’t going to hold its own profits because it is going to pay them out every year.
We will help you learn how to get paid if you are the owner or worker inside of the LLC and what the difference is between the two.
If you are a worker within your LLC, you can be paid according to your job function via a 1099 or a W2. You will be paid consistently through the year with a set rate of income.
If you are an owner of the LLC, you can earn worker salary and be paid additional income that is earned inside of the LLC.
We have a video coming soon to learn more about How You Get Paid Through an LLC.
Partnership Taxation is when the income within the LLC is split between members of the LLC. A Partnership Tax Return is needed to keep track of the partners’ capital accounts.
Sole Entrepreneur Taxation
Sole Entrepreneur Taxation is where all income passes straight to the single member (or owner) of the LLC and shows up on schedule “C” of your Individual 1040 Tax Return.
We want to help you make the best choice when you are forming your Arkansas LLC. Watch this video for more information about S Corp, C Corp, Partnership, and Sole Entrepreneur Taxation.
Also, here is more information on Arkansas LLC and Forming a Limited Liability Company.
Watch this video for even more information on LLC Taxation.