Single-Member LLC Tax Questions and Answers

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Some businesses operate as an LLC with only one owner. This single owner business type can be confusing to many including how they pay business taxes. So, here are some answers to the most common questions about tax filing and payment. 

What Is a Single-Member LLC?

A limited liability company with only one owner is called a Single-member LLC (SMLLC). An LLC is a business entity that separates the business from the owner, offering some liability protection. It also is a pass-through taxing entity that allows the owner to pay the income taxes of the business on his or her personal tax return. 

Tax ID Number? 

Most businesses need what's called (rather confusingly) an Employer ID Number (EIN). This number is used as a social security number for a business. Even businesses without employees often need an employer ID number. An LLC does need an EIN, even with no employees. 

To apply for an EIN, you need to file Form SS-4. This application can be completed online or over the phone, and you can receive your EIN immediately. 

Completing a Form W-9? 

SMLLC owners working as independent contractors may receive a Form W-9 asking for tax identification information. This form is used to verify the business tax ID for the purpose of preparing Form 1099-MISC for income taxes, in the same way as a W-2 is prepared for employees. 

The IRS says the owner's tax ID (social security number or other) should be used when completing form W-9, not the EIN of the LLC.

A single-member LLC is considered a disregarded entity in most circumstances, so this section applies. 

How Are Employment Taxes and Excise Taxes Reported?

To report employment taxes, an SMLLC must obtain an EIN and report employment taxes using the EIN of the LLC. This requirement is needed because it is the business, not the individual owner, who is responsible for reporting and paying these taxes.

Employment taxes are related to employees and include federal income taxes withheld FICA taxes (Social Security and Medicare taxes) withheld and payable, and federal unemployment taxes. 

Excise taxes paid by the LLC must also be paid using the EIN of the LLC, not of the individual owner. 

When Is a Tax ID Number Needed? 

A single-member LLC that is a disregarded entity that does not have employees and does not have an excise tax liability does not need an EIN. It should use the name and TIN of the single-member owner for federal tax purposes. A single-member LLC will need an EIN to open a bank account or if state tax law requires the single-member LLC to have a federal EIN.

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