An LLC, or limited liability company, is a popular business structure because it offers a great deal of flexibility. Its owners, also referred to as members, have the power to choose the company's income tax classification. They can choose to be taxed as a disregarded entity, a C corporation, an S corporation, or a partnership. In addition to Missouri and federal income expenses, your entity is responsible for paying all other applicable local and state fees.
Sole Proprietorship or Partnership Status
Many LLCs elect pass-through status, in which the income passes through to the members who then become responsible for paying federal and state expenses on that income. The company itself is not subject to direct income tax. By default, a single-member entity is a disregarded business that is treated as a sole proprietorship. The Internal Revenue Service (IRS) disregards it entirely. In Missouri, sole proprietorships are not subject to corporate income tax; rather, the sole proprietor pays federal and state fees on the income. If you earn an income of $100,000 for 2018, you, as a sole proprietor, include that on your individual federal and state forms.
A multiple-member LLC is treated as a partnership. A partnership does not need to pay corporate income fees, but each individual owner or member must pay federal and state taxes on their share of the company's income. If your business earns an income of $100,000 for 2018, each member pays fees on their respective share of that income (depending on how profits are divided) on their own individual federal and state returns.
C Corporation Status
If you choose to be treated like a C corporation for this purpose, the company itself must file returns. The Missouri Department of Revenue assesses a corporate state expense on all companies registered to operate. As of 2018, the midwestern state rate for corporations is 6.25 percent of income derived from operations in the state.
If, for example, you earn an income of $1,000,000 for 2018, the company owes $62,500 in corporate income fees. The LLC also owes federal tax on this income, depending on federal rates for overall income. The individual members must also report their share of any corporate income on their individual returns.
S Corporation Status
S corporation status is a popular choice for such entities, but there are limitations. With an S corp., income passes through to the individual owners or members. In Missouri, S corporations do not pay income tax, but each individual owner or member must pay federal and state fees on their share of the income. Consider an LLC that earns an income of $1,000,000 for 2018. If one member owns 40 percent and another owns 60 percent, each member pays on their respective share of the income on their own individual federal and state returns.
Other Missouri Fees
Income tax is just one of the fees that Missouri LLC owners should consider when calculating business expenses.
Missouri Employer Fees
If you have employees, it must pay employer taxes to the IRS and the state. You need to register with the Missouri Department of Revenue and Department of Labor and file withholding fees periodically throughout the year. You also likely need to register with the Missouri Division of Employment Security and pay state unemployment insurance taxes.
You must also collect and pay sales tax if your LLC sells goods in this midwestern state. You need to complete a separate registration with the Missouri Department of Revenue to receive a license.
If you are ready to move forward with creating a Missouri LLC, understand the rules and regulations set forth by Missouri. Should you need additional information, you can visit the state's website to find out what options you have in this area.
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