Ask a Blogger: LLC/S-Corp Tax Filing Status Explained

Blogging is a business and needs to be treated as such when considering taxes and liability. We can post all day about Blogging Tips & How to Make Money Blogging but at the end of the day, you better be on top of your taxes.

There is a lot of confusion surrounding LLC and S-Corps, so this week we brought in an expert to help.

Mom on Dealz is married to an account.  Lucky for us, he writes a weekly series titled Ask an Account to help answer a variety of tax questions including blog specific tax questions.

What is the Difference Between LLC and S-Corp?

LLC stands for Limited Liability Company.  This is a legal classification of business not recognized by taxing authorities.  There are two general types, single member LLC and multi-member LLC.  Single member can only have 1 member, multi-member must have more than 1 member.

An LLC’s main function is to provide a legal separation of business assets & liabilities from personal.  This legal strategy comes with certain tax attributes.  The LLC can provide unlimited losses without regard to the member’s basis (amount of money/property invested, earned & left in the business).  The LLC also pays Self-Employment tax on any profits (a very nasty 15% in addition to your normal tax rate).  Single member LLC files a Schedule C on your individual return; a multi-member LLC can opt to file a Form 1065 return (the same return as a partnership) or can elect to file Schedule C for the member’s potion of the Income or Loss.

A “Tax Election” can be made for both the single member LLC and the multi-member LLC to be taxed as an S-corp.  The entities still operate as LLC’s but take on S-Corp tax attributes in that they no longer pay Self-Employment tax on the profit, but rather they report the income (from a K-1) on their personal tax return.  The downfall is that the losses are now limited by the member’s basis in the company.

We hope this helps to clarify some of the confusion surrounding LLC and S-Corp.  The Coupon Challenge is currently becoming an LLC with an S-Corp election for tax purposes.  In order to provide additional liability protection;  I will have The Coupon Challenge, LLC added under my umbrella policy as well.

Make sure to visit Mom on Dealz for more Blogging Tax Questions or head over to www.cjwtaxpro.net to request rates if you’re looking for a new account.  Madame Deals personally uses Chris for her personal and professional tax preparation.

You can view all out posts by searching Ask a Blogger.

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