If you are interested in starting a business in Georgia, it may be possible to use the limited liability company or LLC structure. In the event that you are the only owner of the company, it will be considered a disregarded entity for tax purposes. However, when an LLC has multiple owners, it will be considered a partnership by default for tax purposes. You may change this designation by filing Form 8832.
You’re only a disregarded entity for income tax purposes
It is important to understand that an LLC that is considered to be a disregarded entity is only disregarded for income tax purposes. This means that your profits or losses flow directly to your individual tax return at the end of the year. However, your company is still a separate entity when it comes to paying payroll and other taxes that a company may be required to pay.
People and companies can have an ownership stake in an LLC
In addition to other individuals, both foreign and domestic corporations are allowed to have an ownership stake in an LLC. In theory, this means that another company that you own could affiliate itself with a new LLC that you have created. There may be special guidelines that need to be followed if a company is listed as a foreign LLC or is partially owned by such an entity.
Deadlines for companies to change their tax status
An LLC that elects to be taxed like a corporation must choose an effective date no more than 75 prior to making the election. Furthermore, the effective date of such an election cannot generally take effect more than a year after it is made. The IRS may allow relief to organizations that aren’t able to conform to these rules.
If you have questions about how to pay business or personal income taxes, a tax law professional may be able to answer them. An attorney may also be able to defend you against an IRS audit being performed on your business or personal tax returns.