LLC Subject To Socail Security Taxes?
I understand that by converting to an LLC as a single member, you can still file a schedule C on your personal income tax return. However, the net income is subject to social security taxes and when you sell, you are not subject to a capital gains tax which is a lower tax rate. This is different from putting your property on Schedule E where there is no SS Tax. Does the LLC lose the benefit of Schedule E? .
the net profit is pulled out of the llc via the k-1, se tax (1/2 of fica) if any were due would be paid or withheld by llc.
Sched C is for sole props or filed a DBA to have a business name.
I believe that a single member LLC is treated by the IRS as a disregarded entity, meaning that the LLC does not have to file a 1065 partnership return, and distribute K-1s to the members. The activity of the entity would instead be filed using the single member's personal 1040 return.
The subject of SE taxes depends on what type of income it is. If it is passive income, as would be income from renting real property, then it would go on Schedule E. If it is ordinary (earned) income, then it would go on Schedule C. Ordinary (earned) income would be subject to SE taxes, passive income is not.
So yes, if the LLC is a single member LLC, it is a disregarded entity, and you would file on your personal return, using a Sch C or E, depending on the source of income.
If the LLC has more than one member, the LLC would have to file a 1065 partnership return, and distribute K-1s to the members. The individual members would file their personal returns using the data communicated to them via the K-1. If this income is earned income, as would be from flipping, etc, then that income would be subject to SE taxes on the individual member's return.