Entrepreneurs often choose a Florida Limited Liability Company (LLC) when they’re searching for the best business structure to provide them with flexible options for tax purposes. Since there is no tax classification for Limited Liability Companies (LLC), they can choose between the classifications that are available to other types of Florida business entities. In order to set your Florida LLC company set up to succeed, it is critical to know the differences between the classifications.
How A Limited Liability Company in Florida Is Taxed
Searching for Florida LLC tax return forms is a waste of time. There is no such thing. A Florida LLC that does not officially file for a different tax status is called a disregarded entity. In those cases, the Florida LLC will be treated as a general partnership or sole proprietorship, depending on how many owners (also referred to as members) there are.
Single-Member LLC Tax Returns
A Florida LLC with one member is taxed automatically as a sole proprietorship. The income tax purposes and expenses of the Florida LLC are reported on the personal income tax return’s Schedule C. The net loss or profit is reported in the income section of Form 1040 as part of their personal income tax return.
Multi-Member LLC Tax Returns
When there are two or more owning members, the Florida LLC is taxed as a general partnership. The income of the company is reported on the members’ own personal tax returns. It is done using From 1065, where the partnership’s expenses and income are reported. Each member is then issued a Schedule K-1 that shows the share of the member’s profit. A breakdown of all members’ percentage shares should be included in the Florida LLCs operating agreement.
Self-Employed LLC Owners Taxes
For the purposes of federal taxation, the Internal Revenue Service considers Florida LLC members that are taxed as general partnerships or sole proprietorships to be self-employed. That can complicate things at times. You may be aware that when you work for someone else the employer is responsible for covering half of your Medicare and Social Security taxes. On the other hand, when you are self-employed, you are required to pay the full amount of those taxes. However, half of your Medicare and Social Security taxes can be deducted from your income on your yearly income tax returns.
Schedule SE is filed for Self-Employment Tax, with your income tax return to report and calculate your self-employment taxes. When you are self-employed you also are required to pay quarterly estimated payments for your personal income, Medicare, and Social Security taxes. For those who do not comply, penalties and fines can be imposed. The self–employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare Insurance. However, you must pay the 2.9% Medicare part of the SE taxon all of your net earnings.
C-Corp and S-Corp Taxation
Florida LLC also can choose to be taxed as a Corporation, as either an S Corporation or C Corporations, by Filing Form 8832, which is the Entity Classification Election form. They are more complex tax structures, so before you make a final decision you should consult with a Florida accountant or business attorney. Corporate tax structure may be beneficial to Florida LLC businesses trying to save capital. Also. it offers a way to reduce self-employment taxes for business owners with profits that are more than what is considered to be a reasonable salary.
In order to file as C Corporation, an Florida LLC must file corporate tax returns every year. Shareholders are also required to report any dividends or salaries on their personal income tax returns.
On the other hand, an LLC that has S Corporation status has a lot in common with a general partnership. The LLC is also required to file informational tax returns and give members Schedule K-1 forms that show their percentage or losses or profits. In contrast to partnerships, members must report their income on Schedule E of their personal income tax returns. Florida is a tax-friendly state that does not impose an income tax on individuals, and has a 6% sales tax. Sales tax is added to the price of taxable goods or services and collected from the purchaser at the time of sale. Goods that are subject to sales tax in Florida include physical property, like furniture, home appliances, and motor vehicles. Corporations that do business in Florida are subject to a 5.5% income tax. However, LLC, sole proprietorships and S corporations are, however, exempt from paying state income tax.
Florida Department Of Revenue information-https://floridarevenue.com/pages/default.aspx