Single member LLC

[Kea]

New client has an LLC that was established in Michigan. He has been preparing his own taxes in Turbo Tax. I've never prepared a return for an LLC. He says he has been reporting his business income on Schedule C. I did see on the IRS website that a single member LLC can be disregarded and reported on the Sch. C. OK, fine, no problem.

My question - Are there any other reporting requirements necessary due to the LLC status? Or, is everything the same a sole proprietor's return?

Any special Michigan requirements? He has since moved from Michigan to Texas. Will the LLC income still be considered Michigan-sourced, even after he moved?

Thanks

[GeneInAlabama]

In Alabama, all LLCs including a single member LLC has to file a business privledge return. I'm sure all states have a similar requirement. On the federal, there is no difference between a sole proprietor and a disregarded entity. I don't know about a LLC that moves to another state. I have never had one. I assume the LLC would be taxed in the state it was formed.

[Lion EA]

Is his business still operating in Michigan? Or is it in Texas now? He probably has an annual report to Michigan and maybe a business entity tax there. Then, he probably has to register with the secretary of state in Texas as a "foreign" company doing business in Texas and have similar reports/fees in Texas. If he's no longer doing business in Michigan, he may want to look into dissolving his Michigan LLC and organizing in Texas. Poke around on the secretary of states' websites in both states to find regulations and forms and fee schedules.

[Kea]

Thanks. Now I have a better sense of what questions to ask and / or what to let him know about.

[Lion EA]

LLCs are a very state-specific entity, so maybe preparers from MI and TX will jump in here.

[Kea]

As a preparer in TX, I don't do very many state returns. I'm not too worried about his regular MI return, although I haven't read the instructions yet - that's on the list for this afternoon. But state or fed, I've never done any business entities other than sole proprietors. And, my clients know that.

This guy has been filing his own taxes until this one (2007, BTW!). So he's been on his own for knowing the requirements previously.

I sent him an e-mail last night letting him know the general state requirements y'all listed above. I also passed on the Secretary of State website suggestion.

[MrMojo]

LLC status is generally determined by STATE law.

SMLLC is a disregarded entity on the Federal level so file a Sch C and put the LLCs name on the business line.

IIRC...

MI... needs to file a corp return (used to have a client from MI who was a SMLLC)

TX... changed their tax laws relatively recently... may need to file a corp return

You should check out the state laws on where your LLC clients are located to learn how each state taxes an LLC... some states follow federal law but many states do NOT and will tax a LLC (even if it's a SMLLC) as a corporation instead of a Sch C or a partnership.

Welcome to the LLC world!

[Kea]

Turns out the guy decided to go back to doing the returns himself. After we discussed his federal (and found out what info he still needed), he decided he was comfortable with completing it. He already had most of it done in Turbo Tax anyway. Plus he's been doing on his own anyway. Hey, I gave him the head's up that he might need business returns.

Thanks for help. At least I learned something even if I didn't get to apply it this time.