LLC Tax Rates for Columbia, MO

As you go about creating your new business in Columbia, MO, you should consider whether to incorporate or not. In addition, determining what form of corporation can be a critical decision to your business’ success. Many times, we’re asked about limited liability corporations and how the LLC tax rates would affect a business formed in Columbia, MO.

Here are a few pointers:

An LLC is not to be considered a separate entity when calculating annual taxes.

The IRS called a LLC a “pass through” entity, similar to the partnership or sole proprietorship. At the end of the year, all the profits and losses of the LLC pass through to the LLC owner’s personal tax returns. This means the LLC does not pay federal income taxes and therefore does not file a federal income tax form.

If your LLC has a single owner, then all the profits (or losses) go to your personal 1040 tax return, as detailed on Schedule C. Keep in mind that if you keep profits inside the LLC and don’t distribute them to yourself, you still must pay income tax on those profits this year.

If your LLC has multiple owners, also called “members”, then there’s some additional tax paperwork that must be handled to help properly divide up the profits (or losses) at the end of the year. Normally, these figures are divided up according to the percentage of the company that is owned by each member, but consult your tax expert to confirm this, especially if you are considering distributing the profits in a way that doesn’t match the percentages owned by the individuals (called a “special allocation”).

Form 1065 will need to be filed each year. This is a federal form that helps the government double check that the LLC partners are including income from the LLC on their personal tax returns.

Schedule K-1 is a document the LLC provides to each LLC member on an annual basis and is used by the individuals on their 1040s, with Schedule E attached.

Before forming a LLC, find out whether your state charges a separate LLC tax or fee. For more information, check the website of your state’s Secretary of State, Department of Corporations, or Department of Revenue or Tax.

As you can see, though the questions start with clear answers, your specific situation many need more attention to make the correct tax decision for your own Columbia, MO business. As with many business topics, it is best to have staff or expert outsources that can help to advise you on your corporate structure and in tax matters.

As a local business service company in Columbia, MO, Moresource strives to provide informative resources relevant to business owners and c-level executives. We provide help with risk management, human resource outsourcing, and payroll management, along with our other core services.