I know if your YTD income is under 4500 bucks, you are not required to file, does the same hold true for LLC (being its only one employee).

Seeing as how even the IRS gives out erroneous information 70% of the time, I'm sure the tax advice here has an even worse record. You should talk to one of your friendly local CPA's, whose livelihood depends upon dispensing accurate information. They'll probably give you some free phone support and a couple useful ideas you haven't even thought of.

This would depend on the requirements of your states corporation bureau. Most require you to file regardless of profits or not. I would use the suggestion posted above and contact someone who deals with this everyday :)

Originally posted by DigitalXWeb
This would depend on the requirements of your states corporation bureau. Most require you to file regardless of profits or not. I would use the suggestion posted above and contact someone who deals with this everyday :) Now that's good information as all states are different. For example, California has a minimum $800 franchise tax that is payable, even if you lose money that year.

Also, to answer your question, you have to ascertain whether you elected your LLC to be treated as a partnership or a corporation for tax purposes. Furthermore, if it is a partnership, we would need to know the number of partners. If it is two or more, then at a minimum, Federal Form 1065 (partnership return) would need to be filed even if there was a loss. Penalties for not filing this form alone are $50 per partner per month plus all the other usual interest and penalties that the IRS is famous for.

Lots of possible answers for this one, fsn. Probably best to consult with a tax expert in your home state.

Best of Luck...

Uhh, seeing as how its already April 22, you're SOL and I'd have to imagine you are going to get hit with some penalties. Anyways, RUN, don't walk to a reputable CPA in your area.

Originally posted by Jay Suds
Uhh, seeing as how its already April 22, you're SOL and I'd have to imagine you are going to get hit with some penalties. Anyways, RUN, don't walk to a reputable CPA in your area.

:eek: :eek: :eek: :eek:

Oooh No. I'm not "in business" yet. The work I have done was as an independent contractor and non-related to webhosting. I know Uncle Sam would be too happy to take me under, but not this go 'round. I was more so inquiring about this before even beginning to implement any serious business decisions. We are still in the PRE PRE PRE PRE PRE stages, LOL.

No Fraud here ;)

Originally posted by fsn
I was more so inquiring about this before even beginning to implement any serious business decisions. We are still in the PRE PRE PRE PRE PRE stages, LOL.

Excellent thinking. Better to have this well thought out before taking the first step. It can save you money and aggravation later. Really, find a CPA or talk to someone at your local community college or chamber of commerce.

Ahh, excellent then! In that case, go have a nice lunch with your fav CPA.

I have a friend who runs a hosting business as an LLC and he is the only equity holder. As far as I know, he doesn't file a 1065. He does file a 1040 Schedule C though.

Also - if you make under $4500, but more than $400 from self-employment, then you need to file a Schedule SE (Self Employment tax) which is a "major sucky". 15.2% on TOP of your income tax. Ouch, ouch ouch.

Another also - as a sole prop. you get to amortize 100% of the first $24,000 (I think this may be bumped to $25,000 for 2002) that you invest in assets, eg computers, flat screen computers, leather desk chairs, etc etc etc - you get the idea :) If you're young (like still living with your parents), or doing hosting as part time job, you can most likely account for things so that you end up showing very little "income / profit" but manage to buy yourself a bunch of nice stuff at the same time.

If you read up on the tax laws, you can do very well for yourself and appear to be broke at the same time :)

Originally posted by Jay Suds
I have a friend who runs a hosting business as an LLC and he is the only equity holder. As far as I know, he doesn't file a 1065. He does file a 1040 Schedule C though. That's correct, If he's the only member of the LLC it would by default be treated as a sole proprietorship, and would file a Schedule C. The default entity type for federal tax treatment of an LLC with two or more members is a partnership, which files a Form 1065.

An LLC can change from its default classification by filing a Form 8832 -- so in either of the above cases the LLC in question could elect to be treated as a Corporation, and then would file a Form 1120 tax return.

Nothing complicated about this! :)

Another also - as a sole prop. you get to amortize 100% of the first $24,000 (I think this may be bumped to $25,000 for 2002) that you invest in assets, eg computers, flat screen computers, leather desk chairs, etc etc etc - you get the ideaBe careful with that. You're talking about a Section 179 deduction, and there are some restrictions. There are also specific rules involving the purchase of "listed" items like computers, cameras, etc. You should have that conversation with your CPA before you start making those purchases!If you read up on the tax laws, you can do very well for yourself and appear to be broke at the same time :) True... but be careful with little items like the above that you might miss in your reading!

WOW, you guys have opened up my eyes TEN-FOLD. To answer someone's question above, I am young (still in college), but I do live on my own. With all that information, I'm still so eager to learn more, but I'm just very adament about going about this venture in the right way. There is a billion and one ways to go wrong and I just want to cut those chances down to lower odds. :D I've been so eager to read books and text about the technical side to webhosting and now I just realized I'm going to have to step up on the accounting, tax, and other legal entities.

And like I said before, since I'm in the PRE PRE PRE PRE PRE stages, I'm giving myself time to be pretty efficient in all areas.