A Limited Liability Company (LLC) is a business structure allowed by state statute, but IRS does not recognize LLC on tax purpose. The IRS treats an LLC as either a partnership, or a corporation depending on the number of members and elections made by the LLC.
For income tax purpose, a single member LLC is treated as a sole proprietor by default. In this case, the LLC does not need to pay income taxes or file a tax return with the IRS. The LLC’s net income, income, and expenses items are reported on the member’s personal tax return (assume the member is individual).
A domestic LLC with at least two members is classified as a partnership for federal income tax purposes by default. As a pass-through entity, an LLC needs to file tax return for the business, but does not pay entity-level taxes on its income; instead, profits and losses pass through to the members, then the members will report the apportioned profits/losses on their own income tax returns with applicable tax rates, regardless of whether the income is distributed or not. If the LLC is profitable but does not distribute any cash to the owners, the owners are still subject to tax on the income of the LLC. If the LLC has a loss, then the owners can take advantage of company losses on their own tax returns.
By filing Form 8832 to IRS, an LLC, regardless of number of members, can elect to be treated as a corporation for income tax purpose. A corporation's income may subject to double taxation. A corporation must pay taxes on its income when earned, and the shareholders must pay taxes on any dividends or other distributions they received from the corporation. However, the corporation can choose to retain the earnings to finance growth and reasonable needs of the business up to USD 250,000 (USD 150,000 for personal service corporation) to avoid double taxation. Accumulated Earnings Tax with tax rate 20%, in addition to regular income tax, will be applied on corporations for unreasonably accumulating earnings exceed USD250,000 (USD 150,000 for personal service corporation).
All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.
Individual income tax is imposed on the worldwide-sourced income of U.S. citizens or residents, and on the domestic-sourced income of U.S. non-residents. According to the IRS, not everyone is obligated to file a tax return, such as in situations below the standard deduction. The following article will provide a brief overview of who is required to file a U.S. individual income tax return.
When each HR team is responsible for managing over 80 employees, optimizing departmental structure and budget management while reducing compliance risks has become crucial to organizational success. When HR architecture align with organizational complexity, budgetary capacity, and proactively mitigate audit liabilities, this function becomes indispensable.
In addition to the job offer requirements and employee benefits outlined in the previous articles, companies often offer a number of other benefits that can be discussed with candidates before making an offer. This article will introduce some of the most common benefits companies may provide.
The B visa is one of the most common visas for visitors to the United States. It comes in two categories: the B-1 visa, for short-term business visits, and the B-2 visa, for tourism or medical treatment. Travelers may also be issued a combination B-1/B-2 visa, valid for both purposes. Typically, a visitor may be admitted for up to six (6) months at a time, with the possibility of requesting an extension if necessary.
