Single-Member LLC Tax Return

Previously, I gave a broad overview of the US limited liability company / LLC business structure, along with its advantages and disadvantages. This post offers an overview of the income tax process associated with single-member LLCs (aka SMLLCs). This post may be particularly useful for LLC drop shippers.

As the owner of a US-based single-member take the following steps

• submit the LLC's net income or loss on a Schedule C when submitting your personal individual tax return form to the Internal Revenue Service (IRS). 
• Use a separate schedule C form per business. Example, if you have 3 businesses, use 3 schedule C forms
• Use a schedule SE form IF your (combined) schedule C net profit exceeds USD 400 for a year, a schedule SE (one schedule SE will apply to all schedule C forms). 
• Must have an employer identification number / EIN if you must file excise tax returns and or have employees. You may get an EIN free of cost, even if you do not need one. This is sometimes an attractive option for the sake of privacy and the ability to use the EIN in lieu of the personal SSN. Enter the EIN on the form C 

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• In the case of most US states, the primary address of the business must be a street address (NOT a PO box address). That street address may be that of your registered agent (aka resident agent) or, if privacy is not your concern, even your home address. NB. Banking for the LLC should be separate from your personal banking. 
• Observe the same filing due dates and extensions on due dates that apply for individuals and sole proprietorships
• Regarding setup expenses. As the owner of a single-member LLC, you can NOT currently include setup expenses (aka 'organizational expenses') as 'business operating expenses' on the schedule C of your tax return. 
• Taxes payable & deductions redeemable are as follows. 
• Self Employment tax (aka FICA) payable has a rate of apx 13% on the first USD 100,000 of your LLC's net income
• Medicare tax payable has a rate of 2.9% on all net income
• Deduction redeemable on your regular federal income tax return equals 50% of all self employment tax payable

Example: Net income: $70,000 

Less all SE taxes (@ 15%): $10,500Redeemable Deductions (@ 50% of all SE tax) = $5,250

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RELATED ARTICLES

• Advantages & Disadvantages of an LLC as a business structure
• Details of filing taxes as a single-member LLC (SMLLC)
• Legal setup of a single-member LLC by a foreigner or US person (citizen or alien-resident)