If you are running a limited liability company (LLC) in Louisiana, you have to understand all the documents that you need to prepare and file with the state. Among them are ongoing compliance reports and Louisiana tax form requirements.
LLC Taxation
Business owners who choose to form an LLC often do so because of the benefits that this structure offers. Not only does it protect the personal assets of the owners, which are also known as members, but it also allows the company to choose pass-through taxation. It means that the members report the profits and losses of the company on their individual tax returns.
Typically, an LLC is not subject to federal taxes. However, the state where you organized your business may collect certain taxes.
Here is how Louisiana LLC taxes work:
- Unlike corporations, your LLC will not be taxed at the business level.
- The LLC members will pay self-employment taxes on the profits they get from the business.
- The members will pay Louisiana state taxes on any profits they get less the state allowances and deductions.
- All members will pay federal income taxes on the profits minus the federal allowances and deductions.
- In some cases, an LLC may have to pay Louisiana sales taxes on their products.
- If an LLC has employees, it has to pay payroll taxes on the salaries given to employees.
- Employees of an LLC will have to pay federal, state, and payroll taxes on their income.
The first three items get taxed as pass-through income for the members and managers who receive profits from the LLC. You will have to report the profits on your federal and individual tax returns. Make sure you use the appropriate forms and pay the right amount for each filing.
Federal Income Tax
As stated earlier, Louisiana LLCs do not usually have to pay taxes directly to the federal government. That is because the default status of a single-member LLC is a sole proprietorship, while a multi-member LLC is taxed as a partnership.
However, the members of the LLC have tax obligations. The owner of a single-member LLC needs to report all profits and losses on their personal tax return using tax form 1040 of the Internal Revenue Service (IRS). It is usually reported in Schedule C. Depending on where your income comes from, you may have to attach additional Schedules. Meanwhile, the members of a multi-member LLC will have to use form 1065. The self-employment tax of the LLC members and managers who get profit out of the company is 15.3%.
If your company decides to be taxed as a C Corporation, you will have to file business taxes on a federal level using form 1120. If you opt to elect S Corporation taxation after submitting IRS form 2553, then you will have to file taxes using Louisiana Tax Form 1120-S.
State Taxes
Typically, there are two types of taxes that Louisiana LLCs have to pay. Those are the state income tax and sales tax. Both of them are to be filed with the Department of Revenue (DOR).
- State Income Taxes – The members of a Louisiana LLC have to pay state taxes on the money that you earn from the company. These will flow through to your individual tax returns. That is where you will pay the income tax. The standard rate from Louisiana state taxes will vary between 2% and 6%, depending on how much earnings you have. You can also apply regular allowances and deductions.
- State Sales Taxes – If your company sells physical products or offers certain services, you may have to collect sales and use taxes. You will pay these to the DOR. Sales taxes in Louisiana are collected at the point of purchase. The rates will vary depending on where you are located. The region, city, and county are considered. The state will usually set a base sales tax rate, and the counties or cities will levy additional amounts on top of that. You will have to register with the DOR to collect and pay sales taxes. You can do this online or by mail. Submit a completed Application for Louisiana Revenue Account Number form to acquire a seller’s permit. After that, you will have to submit sales tax returns periodically using Louisiana tax form R-1029.
Other Possible Taxes
Depending on your activities, you may have to pay additional taxes. Here are some of them:
- State Business Taxes – If your company chooses to be treated like a corporation for taxation, you have to file corporate income taxes with the DOR. Use form CIFT-620 for this purpose. Louisiana applies corporate income taxes to any taxable income at a small series of marginal rates. Check the DOR website for more information.
- Employer Taxes – If your LLC has employees, you will have to pay employer taxes. Generally, you withhold and pay employee income taxes to the DOR. However, you will have to register your business with the DOR first using form R-16019. After registration, your company will have the obligation to file withholding taxes periodically. Additionally, you may need to register and pay state unemployment insurance taxes to the Louisiana Workforce Commission. The filing should be done quarterly.
When calculating your Louisiana LLC tax obligations, you have to consider the federal, state, and local taxes. Doing this can be a bit challenging since you also need to take into consideration the specific circumstances of your LLC. Mistakes may lead to wrong payments that will have negative implications for your company.
Aside from tax obligations, you will also have to comply with other state requirements to ensure that your company remains in good standing. If you are having trouble figuring out how to handle these, you can talk to our team at DoMyLLC. Discuss the needs of your company with us so we can come up with a personalized solution that will be suitable for your company’s circumstances. Contact us now and find out how your Louisiana LLC can benefit from our services.