How is an LLC taxed?
LLC corporations are not taxed as separate entities. Instead, all the profits and losses ‘pass through’ the business to each member of the LLC. So, members of the business report profits and losses on their personal federal tax returns, in the same way owners of a partnership would.
Unlike a corporation, a limited liability company (LLC) is not a separate tax entity. Instead, the Internal Revenue Service (IRS) calls it a ‘pass through’ entity, which works in the same way a partnership would. So, instead of the business being taxed as a whole, members of the business report their profits and losses on their personal federal tax returns.
It’s worth remembering, however, that some states in the USA impose an annual tax on LLCs, so be sure to talk about that with your lawyer if that will be a deciding factor for the legal form your subsidiary may take.
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