An LLC in FL - How is the Florida Limited Liability Company Taxed?
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Federal Taxation of an LLC in Fl is a common question for those forming a Florida limited
liability company. The good news is that if you know the rules and meet certain timing
requirements, you can choose how your Florida LLC will be taxed for income tax purpose.
This article discusses federal taxation only. Florida has no personal income tax so LLC profits
under the past through will not be subject to state income taxation. Florida does have a
corporation income tax.
TAX CHOICE #1: PASS THROUGH TAXATION
The first tax choice for an LLC in Fl is to be taxed as a pass through entity. This means that the
legal entity itself does not pay any income tax on its profits and gains. Instead the profits are
passed through to the owners of the Florida limited liability company and paid by the owners on
their individual tax returns.
The process depends on whether the business is owned by a single member or by more than one
member. With a single member LLC, the legal entity is disregarded for all tax purposes and the
single owner reports the income on its return as if the business were a sole proprietorship. This is
for taxes only. A single member LLC in Fl still gets all the benefit of a limited liability company
for all other purposes such as gaining limited liability protection.
For a multi-member business, the partnership tax rules of the Internal Revenue Code apply.
Same end result where the owners pay the tax but there are some additional steps. The business
must prepare an information return to file with the IRS and then send each member a tax form
which is known as a K-1 which evidences his/her share of business profits and losses.
If you want this tax structure, this is the default tax structure which means there are no elections
you or your LLC in Fl need to make.
TAX CHOICE #2: C CORPORATION TAXATIO