Filing taxes with an LLC?

Question

I was not sure where to place this post, so feel free to move it if necessary.  My apologies in advance.

I have an RV park that has been running for 3 years and I have been filing taxes under my name, and just running it as a self employed type of business.   I would like to start an LLC in order to separate business from my personal assets.  I am not sure how the tax process works with an LLC in Texas though.

Can I just file my taxes the same way I have been, with the same/similar forms for profit/loss?  Or does an LLC have similarities to a corporation where I would need to file a lot of extra paperwork explaining what assets the park had, how much inventory of any products used at the park were left over at the end of the year, how many feet of toilet paper is left in the bathroom, ect (basically making the tax filing really complicated and a lot of extra things to keep up with)?

I read that there is some tax advantages to filing taxes with an LLC compared to a corporation because it could be done under the owners name, but I don't really understand what the differences are.    If anyone could explain what I would need to do differently once the LLC is formed that would be great.

Account Closed · Answer

There is no difference if it is under an LLC. There is a difference if it is a Corporation.

Kim Gibson · Answer

When you set up an LLC you can elect to run it as a corporation.  When you elect to run it as an S-Corp there are tax benefits.  As a single owner S-Corp you can elect to take a "reasonable salary" meaning from the profits of your business you would take a salary less than the gross profits and would pay Self-Employment taxes out of that salary.  Currently you are paying Self-Employment tax on 100% of your profits instead of the "salary."

For example

Scenario 1- Self Employed Filer

say you made $100,000 gross profits in your business.  As a Self-Employed filer you would pay 15% or $15,000 to Uncle Sam in just self employment taxes( social security, medicare...) Then you would pay Income taxes on the $100,000 in whatever tax bracket you are in after deductions.

Scenario 2- LLC set up as an S-Corp

Your Llc made $100,000 gross profits.  A reasonable salary for the work you have performed for the business is $40,000.  From that salary you will pay Uncle Sam the Self-Employment taxes at 15% of $40,000. Your SE taxes will be $6,000.  The other $60,000 of profits can be taken from the business as a "draw" and will not be taxed SE taxes.  You will still pay income taxes on the full $100,000 at whatever tax bracket you are in.

So the savings is in the SE taxes (social security, medicare...). In the above example the savings is $9,000.

Setting up an LLC will cost money,( Im in Utah and I just paid $2500 to set up the LLC thru a CPA who did the state and federal filings) You will also have to set up payroll to "pay" yourself ( my payroll company costs me $75 per month) and to have the CPA file the taxes for my S-Corp will cost me $1,200 next year ( and corporations tax day is in March, not April). You will have to set up a business account at your bank and get local and state business licenses if you don't already have them.

I don't know any specific Texas rules for setting up an LLC and taxation, but I believe the federal filing process will be similar.  An LLC set up as an S-Corp has tax benefits and and LLC has asset protection benefits.

Basit Siddiqi · Answer

@Casey LanceTexas has unique filing obligations for LLC's that operate within the state - Texas Franchise TaxIf you have a multi-member LLC or a Corporation, you may be required to provide additional information. However, some of the additional information is waived depending on what your income / assets are.best of luck

Ashish Acharya · Answer

SMLLC will not complicate your federal tax filing as it is disregarded for tax purposes. You will still report your rental under Sch E in your 1040.  You will have to file an extra report with TX.

Casey Lance · Answer

Great, this is what I was hoping for.  I guess there is a Franchise tax form that has to be completed in TX for an LLC, but it seems pretty basic.  So it sounds like there are not too many extra steps, that is great to know.  Thank you for the reply