In my Operating Agreement, I stated distribution can occur anytime, if any. But for tax purposes, the amount that I do not distribute at the end of the year, is that still taxable, even though I didn't make a withdrawal? Why is LLC considered sole proprietorship for tax purposes, if you can leave profit in the company for one year, and next year, you can withdraw that money for tax saving reasons?
Since your LLC is a single member company it is probably a disregarded entity for federal tax purposes (unless you elected to have it taxed as a corporation). You can't leave money in one year and then withdraw the next year for tax savings - you are personally taxed on the net income of the LLC each and every year, whether you actually take the money out of the LLC's account or not.
The foregoing is commentary regarding a general legal question. It is not intended to be legal advice specific to the reader's individual situation nor does it create an attorney-client relationship between the author and any reader. You are encouraged to contact a qualified attorney to discuss your legal situation.
One would have to know the IRS election you made regarding treatment, but if you sought to avoid double taxation by be treated as an individual instead of a corportation, withdrawal would be irrelevant.
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Curt Harrington Patent & Tax Law Attorney Certified Tax Specialist by the California Board of Legal Specialization PATENTAX.COM This communication is general information and not legal advice, and does not create an attorney-client relationship. This communication should not be relied upon as any type of legal advice. Please note that no attorney-client relationship exists between the sender and the recipient of this message in the absence of either (1) a signed fee contract and (2) remission of an agreed-upon retainer. Absent such an agreement and retainer, I am not engaged by you as an attorney, nor is any other member of my law firm.
All the answers are true. See Form 8832, Entity Classification Election. If you did not make an election, timely (75 days), them Sch C, Form 1040 is correct (and its SE tax too)
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