LLC BUSINESS TAX CALCULATORS
Trying to get an idea what your tax implications and liabilities will be as you set up your LLC? Taxes are so damn confusing aren’t they? Because I started off knowing absolutely nothing about how the different LLC entities are taxed, it's been absolute hell for me to try and figure this whole LLC and business tax thing out, and it took me days of research and many calls to CPAs and business attorneys. If you've reached this article, I KNOW you can relate! So I figured I'd spend a little more of my valuable time writing this article to save you a lot of valuable time. Hopefully this quick article will bring you some clarity.
Tax planning is a critical part of your overall business planning because it can save you a lot of money. While taxes can be tedious and confusing, it’s important to get it all set up now, because you have to know how to treat your business to get all of the tax advantages -- not to mention, your CPA will love you for it. You can’t wait until the end of the year, making a mad dash to your CPA on April 14th, asking if they can get you out of your tax mess. Speaking of CPA's, I know you don't want to hear this because you're here trying to learn this stuff yourself, but I'm still going to advise you that you should always speak to a CPA and/or attorney to make sure that you're clear on things and so that things are done right. If you're a business or investor, the last thing you want is to mess up your taxes and get audited!
Before getting into the tax calculators, here’s a quick explanation of the different types of LLC business structures how they are taxed, and the types of forms you'll need.
LLC SOLE PROPRIETOR:
Sole Proprietorship goes on personal taxes. It’s considered a disregarded entity for tax purposes. That means everything including the income, losses, and profits will ALL be filed on your personal taxes.
If you’re a Sole Proprietor, you will simply need a Schedule C form to file on your personal taxes on a standard 1040 form. Any business that has paid you $600 or more of the year, should be sending you a 1099-MISC.
LLC PARTNERSHIP:
LLC Partnerships and S-corps are flow through entities. This means, the profit will flow through into your personal taxes.
If you have an LLC Partnership, you will file a 1065 tax form, which is where all of the income, loses, and profits are calculated. Whatever your profit is, will then get divided among partners and will go onto a K-1 form, which will you will file on your personal taxes (1040 form). If you have one of your members actively managing your LLC, you may also have to give a W-2 or 1099-MISC to the manager who will then file onto their 1040 or Schedule C form for their personal taxes.
LLC S-CORP:
S-corps file an 1120S form and each shareholder will get a K-1 form (for interest, capital gains, & dividends), which will then will go on your personal tax 1040 form. The other thing you'll have to do is pay yourself a reasonable salary. Since you'd be paying yourself a salary as an employee, you'd have to keep meticulous record of payroll and taxes withheld. You'd also give yourself and your employees/contractors W-2 forms or 1099 forms, which will then be filed on employee's 1040 and/or Schedule C forms. There's also form 941 that you'll have to file for quarterly employee tax reports, and may have to also make estimated tax payments depending on the amount of taxes owed.
If you want to to be taxed as an S-Corp, you cannot wait until tax season! You will need to know this in advance! Once you decide this is the best option for your business, you will need to file a 2553 form within the first 2 months of the tax year in order to claim S-Corp Status. This is why tax planning is so important!
NOTE: A lot of people wonder if it's more advantageous to do an S-corp or Partnership. This should help clear up a couple of things...
It’s typically more advantageous for LLCs that are more-so below 30k profit range to file as a Partnership, and LLCS that are more so for the 30k and above range to file as an S-corp. This is typically due to the additional administrative work, responsibilities, and additional cost to do taxes with the more complex 1120s forms (which is 47 pages). However, once a business gets into a higher income bracket, that's when it may be worth it to go through the extra motions to save money, because that's when you're more likely to be liable for paying more in taxes. In a nutshell, the higher the income, the more tax liability, the lower the income, the less tax liability. (There's a link at the end of this article that explains advantages and disadvantages of each entity.)
If you want to to be taxed as an S-Corp, you cannot wait until tax season! You will need to know this in advance! Once you decide this is the best option for your business, you will need to file a 2553 form within the first 2 months of the tax year in order to claim S-Corp Status. This is why tax planning is so important!
NOTE: A lot of people wonder if it's more advantageous to do an S-corp or Partnership. This should help clear up a couple of things...
It’s typically more advantageous for LLCs that are more-so below 30k profit range to file as a Partnership, and LLCS that are more so for the 30k and above range to file as an S-corp. This is typically due to the additional administrative work, responsibilities, and additional cost to do taxes with the more complex 1120s forms (which is 47 pages). However, once a business gets into a higher income bracket, that's when it may be worth it to go through the extra motions to save money, because that's when you're more likely to be liable for paying more in taxes. In a nutshell, the higher the income, the more tax liability, the lower the income, the less tax liability. (There's a link at the end of this article that explains advantages and disadvantages of each entity.)
LLC C-CORP:
C-corps file an 1120 form and shareholders will get a 1099-DIV (dividends) form, which will then will go on your personal tax 1040 form. If your C-corp has employees or contractors, you’ll give W-2 forms and/or 1099-MISC, which will then be filed on employee's 1040 and/or Schedule C forms. Like S corps, there's also form 941 that you'll have to file for quarterly employee tax reports as well as make estimated tax payments.
If you are a C-corp, you will be dually taxed, meaning that the business pays corporate tax and that the owner pays taxes on dividends. Typically, this is most beneficial to businesses in the high income brackets with employees who receive benefits.
There are a few different options and tools that will help you calculate what your taxes will be. See the list below.
TOOLS FOR CALCULATING/ESTIMATING LLC TAXES:
1. Quick Reference Charts:
If you’re trying to set up or structure your LLC and figure out the tax liability for your real estate or other businesses, you can get a general idea of what your tax implications and liability will be at the link below.
When you get to the page, there are options on the left side of page:
- How to figure out your tax rate if you’re NOT a C-corp [aka Partnership or S-Corp]
- How to figure out your tax rate if you’re a C-corp
Click on whichever corresponding link that applies to your business: (Click Here to Go see the Table and Figures)
The above site makes it incredibly simple to understand how your tax liability will most likely pan out based on the amount of income your business makes.
2. Tax Form Tool + Instructions:
For those who want to get down to the nitty gritty and cater it specifically to your situation, There is a 1065 Calculator and instructions on how to fill it out at the links below.GET 1065 CALCULATOR HERE
(VIDEO INSTRUCTIONS ON HOW TO FILL OUT 1065 FORM BELOW)
(VIDEO INSTRUCTIONS ON HOW TO FILL OUT 1120 FORM BELOW)
3. Complete Practice Tax Form Page:
Tax Form Calculator has the entire list of IRS forms such as (K1, 1040, Schedule C, Schedule E, etc.) that you can use to estimate/calculate your taxes!! How awesome is that?!Bonus!
BENEFITS & DRAWBACKS:
If you want to know the benefits and drawbacks of each tax scenario, such as Partnership, S-Corp, etc. You can get a nearly complete breakdown from InternetLegalAttorney.com
Bonus#2!
WHERE YOU CAN DO TAXES FOR FREEEE!
