Who pays the tax on this business?


lew

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An LLC just had its taxes done for 2010, and it has been determined that the company owes about $30K to the IRS. Earnings have not been distributed to the owner. The owner understands that HE, not the company, is responsible for paying those taxes. This is not correct, is it? Since the profits remain with the company, wouldn't the company be responsible for paying the taxes?

Thank you for your help.
 
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If he is the sole owner of the LLC then he must report all of the profits or loses of the LLC on his personal return on Schedule C. He has to pay the 30k he owes even if he chooses to keep the money within the company.
 
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An LLC does not have its taxes done unless the LLC has made the election to be taxed as a corporation.

If this is a SMLLC (single member LLC), the expenses and income are reported on Schedule C and the self-employment tax is figured for S/E. Which is then reported on the LLC owners 1040.
 

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