Originally Posted by Janese909
#1;My business is listed as a LLC , however it is truly a sole proprieter ship and has been for 3 years now. I don't have any partners or share holders at all. What do I need to do to change the LLC status?
#2;Is changing the LLC status beneficial to me? meaning how does this change how I pay my taxes exactly?
#1;Your biz is actually SMLLC, As a SMLLC, the IRS by default treats your LLC as a disregarded entity, meaning that you don't have to file a separate informational tax return for the LLC. Instead, all of your revenues and expenses are recorded on your Sch C on your personal 1040 return;assume that you want to convert the SMLLC to MMLLC, then, you do not need to apply for a new EIN#. The year you add a partner, you need to file a partnership tax return, from 1065. Individual partners would receive a K-1 for their share of income or losses to be reported on that owner's tax return. LLC's are flexible entities for bringing in and removing members. Check with your state to see if there are any formal filings with the secretary of state that need to be done, typically the I would advise a very strongly written operating agreement document re aren't. There isn't any requirement for minimum percentage either.
NOTE: when you convert from a sole proprietor to a partnership, MMLLC, I mean, then, you do have to get a new EIN #. However, you are not converting to a "partnership", the SMLLC remains the same entity, the "LLC" regardless of how many members are involved.
#2; As mentioned above, it depends on the situation.; you may convert your SMLLC to an S corp / A C corp/ a MMLLC or etc. One of the most important decisions that business owners make is selecting their ownership structure. When determining what type of entity will fit your business best—LLC, partnership, S corp, or C corp—consider such factors as raising capital, control, legal liability, and tax benefits. Also,you need to establish a back-up plan because once you have made your decision regarding which entity to choose, changes in ownership, tax law, or the economy may make it necessary to convert to an entirely new type of entity. Having legal protection within your new entity is a necessity and can make a business more attractive for investors as most require some form of legal liability protection. S corps, C corps, limited partnerships, and LLCs are popular because they have limited personal liability for debts and other actions undertaken against the entity. Tax benefits should not be overlooked or underestimated when converting yoru LLC to a new business since each entity type has tax opportunities as well as consequences.. S corps, partnerships, and LLCs taxed as partnerships are pass-through entities, which mean they "pass through" taxable income, interest, dividends, deductions, and credits to the shareholders or partners responsible for paying tax. This avoids the double taxation associated with C corps that pay entity-level taxes and then distribute dividends that are subject to individual taxes.