How Do I File My LLC Taxes?

I got this question from a client that we get frequently:

Tax question when you get a sec… my friend created an LLC for his “production” company.. him and his wife are “actors”

when they were getting an EIN it’ asked if they wanted to be considered a single member llc since they are married, or a two member llc

something about a disregarded entitie if they chose 1 member…any idea about the tax advantages of one vs the other?

If they choose to be a single-member LLC that is being taxed as a disregarded entity then they will file their LLC income and expenses on a Schedule C on their personal tax return. That sucks because any net profit carries an additional 15.3% in self-employment tax.

It also sucks because it is more closely scrutinized and brings a higher chance of audit

If they file as a 2-member LLC without making any elections, then they will file as a partnership with a 1065 tax return. 1065s also carry self-employment tax to the active members, but does not have the audit risk of a Schedule C

As either 1, 2, or multi-member, they have the option of electing to be treated as an S-corp or a C-corp. Neither one has self-employment tax or the audit risk.

Which form is best will really depend on their overall tax situation