How to File Taxes as a Single Member LLC

Hey there, party people. Today, I want to answer another user question. Today's question is how to file federal taxes as a single member LLC?

It's a simple question, but it's a hard question at the same time. If you're a single member LLC, the way you're going to file your taxes is you're going to include all your business income and losses on your Schedule C which gets attached to your 1040.

So, it's actually fairly straightforward and easy. The hard part about this is you need to make sure that during the course of the year, you're keeping track of all your business income and expenses so that you can include that information on your Schedule C. So, you're going to need know how much money you made. You're going to need to know how much you paid in business expenses.

These expenses could be anything from rent. So this office I'm in right here, I pay rent for this office. That's a business expense. It could be for software you purchased for the business. It could be for the computer you purchase for the business. I know most people use their computers for business and personal.

You're going to need to talk to an accountant about how to figure out how much you can deduct for personal and how much you can deduct for business. But that would be a business expense. If you went out and met with people, potential clients, and referral sources, and people like that, those are all expenses that you're going to be able to deduct as part of your business income.

There's actually some significant benefits to forming an LLC, and/or you don't even need to form an LLC. You can be a sole proprietor technically. So, there's a lot of benefits to being taxed as a business. And one of which is you can deduct, I believe it's 20% of your profit from your business, from on your personal tax return. That's a huge benefit if you think about it.

So if you netted a $100,000 from your business income, and that would ordinarily be taxed at, I think it's around 15%. I know you accountants out there and you're going to correct me and tell me I'm a lawyer that shouldn't be doing tax stuff. And maybe you're right, but I believe that's correct. So now instead of paying $15,000, you're going to pay 15% on $80,000 of income because you can deduct that 20% or $20,000.

So, that does a huge benefit to a lot of people. In terms of how do you file federal taxes as a single member LLC, it's really just as easy as filling out that Schedule C and including it with your tax return. You're going to pay self-employment taxes on all that money that you earned from the business, but you still get to deduct quite a bit so that you can save yourself a lot. So, this is different than if you're an employee. When you're an employee, you basically have to declare all your wages. You don't get to deduct any expenses off your wages.

As a business owner, you get to net out the expenses from the revenue of the business and you only get taxed on the profit that your business earned. So, that's a huge benefit. And that's why a lot of people like to become self-employed and like to own their own businesses or even become an independent contractor, because you can actually pay a lot less in taxes by doing it that way. So, there you have it. That's how you file your taxes as a single member LLC.

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