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Although being taxed like an S corporation is probably chosen the least often by small business owners, it is an option. For some LLCs and their owners, this can actually provide a tax savings, particularly if the LLC operates an active trade or business and the payroll taxes on the owner or owners is high.
How to tell if a company is an S corp or a C corp C corps are separately taxable entities. They file a corporate tax return and pay taxes at the corporate level. ... S corps are pass-through taxation entities. They file an informational federal return, but no income tax is paid at the corporate level.
How to form an LLC Step 1: Choose a state in which to form your LLC. ... Step 2: Choose a name for your LLC. ... Step 3: Choose a registered agent. ... Step 4: Prepare an LLC operating agreement. ... Step 5: File your LLC with your state. Step 6: Obtain an EIN. ... Step 7: Open a business bank account.
What is federal tax classification? The Internal Revenue Service (IRS) has six primary ways a business can be classified for tax purposes: sole proprietorship, partnership, C corporation, S corporation, limited liability company (LLC), and nonprofit.
Disregarded entities are the simplest tax classification with straightforward tax reporting. Your LLC is not taxed or required to file a tax return. Instead, the business profits and losses pass to you as the sole owner to be reported on your personal income tax return.