Question

On which tax form does a single member LLCs with one individual owner report its income and losses?

1) Form 1120
2) Form 1120S
3) Form 1065
4) Form 1040, Schedule C

Answer 1

A single-member LLC with one individual owner reports their income and losses on Form 1040, Schedule C. This form allows for reporting income and expenses related to the operation of a sole proprietorship. The social security tax of 6.2% on income below a threshold is considered proportional.

Step-by-step explanation:

Single member Limited Liability Companies (LLCs) with one individual owner report their income and losses on Form 1040, Schedule C.

This form is associated with the filing of individual income taxes and serves for reporting income and expenses from a business you operated or a profession you practiced as a sole proprietor.

LLCs are considered disregarded entities for federal tax purposes unless they elect to be treated as a corporation. Therefore, a single member LLC's income is taxed on the individual's tax return.

An individual owning a corporation and being the sole employee would have to pay various types of federal taxes, including income tax, self-employment tax, and possibly others depending on the corporation's structure.

If unincorporated, self-employed individuals also pay income and self-employment taxes. The social security tax, a flat rate of 6.2% up to a certain income threshold, is considered a proportional tax.