What is a Registered Agent for an LLC – and Why Does Your LLC Need One?
When forming an LLC in Delaware, a critical step is choosing a Registered Agent. This role is not a formality. It’s a legal need. It’s
In the U.S., the tax classification of a Limited Liability Company (LLC) is influenced by the number of owners, also known as members. Here’s how it works:
Single-Member LLCs: By default, a single-member LLC is considered a “disregarded entity” for tax purposes. This means the LLC itself is not taxed separately; instead, the income and losses are reported on the personal tax return of the single owner1.
Multi-Member LLCs: A multi-member LLC, on the other hand, is taxed as a partnership by default. The LLC does not pay taxes directly; rather, profits and losses are passed through to the members, who then report their share on their individual tax returns1.
An Employer Identification Number (EIN) is crucial for both single and multi-member LLCs as it is used by the IRS to identify the business for tax filings. It’s necessary for opening business bank accounts, hiring employees, and handling other business-related financial activities.
A Disregarded Entity is the term for Single-Member LLCs. It’s when the IRS checks the owner for tax status. (The IRS calls single-member LLCs not taxed as C-Corporations or S-Corporations “disregarded entities.” In this case, the IRS taxes the LLC like its owner.)
• If a non-US resident owns the LLC, the IRS will tax the LLC in the same way as it would tax an individual who is a non-US resident.
• If another company owns the LLC, the LLC follows the same tax rules as a branch of the parent company.
Like Single-Member LLCs, Multi-Member LLCs default to tax classification. But they’re not Disregarded Entities. The IRS sees them as partnerships for tax reasons. Here’s how it works:
• In a Multi-Member LLC, it’s a partnership by default. The company doesn’t pay income taxes. Instead, members report profits and losses on their personal tax returns.
• An LLC earns money abroad. If its members are non-U.S. residents, they generally avoid U.S. income tax on that money.
• When you’re in a Multi-Member LLC, everyone has to report their profits and losses. To do this, file a Form 1065 for the LLC. Then, each member gets a Schedule K-1 to report on their tax returns.
• When a different company owns a Multi-Member LLC, it’s taxed based on the parent company’s rules and tax treaties.
Both Single-Member and Multi-Member LLCs have pass-through taxation. Profits pass to owners' tax returns.
LLCs act as pass-through entities, avoiding taxes. Owners get profits and losses. For non-U.S. residents, taxation follows home country laws. Non-residents face no extra LLC-specific taxes. They can bypass U.S. income taxes with conditions. To qualify, owners must live in tax-free areas and avoid U.S. business. Non-resident aliens get taxed when involved in U.S. business. Significant U.S. presence triggers taxation. Non-residents forming LLCs need an EIN. You must file IRS forms based on LLC activity.
• All businesses must file yearly, even without taxes due. Different types require specific forms for filing:
1. Single-member LLCs file Form 1120 and Form 5472.
2. C Corporations submit a complete Form 1120.
3. Multi-members LLCs use Form 1065 and Scheduled K-1
If your business is in Delaware, Wyoming, Florida, or Nevada, don’t forget about additional fees like franchise taxes.
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