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Help! This is why a social worker should not go into business for herself, no business sense. We are a LLP, i understand that means that we are not employees that we take a "partnership distribution."
We do not do payroll per se. I have been to the IRS web site and am lost. Where can I get a how to on LLP's with answers to questions like, do we pay self employment tax, how much should we hold back for taxes, when do we start paying taxes? Maybe I am making this harder than it is, my tax guy says not to worry once we make a profit we will pay taxes. This worries me. Thanks
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[[ Help! This is why a social worker should not go into business for herself, no
business sense.]]

At least NOT without the help of a qualified tax professional.

[[ We are a LLP, i understand that means that we are not
employees that we take a "partnership distribution."
We do not do payroll per se. I have been to the IRS web site and am lost.
Where can I get a how to on LLP's with answers to questions like, do we pay
self employment tax, how much should we hold back for taxes, when do we
start paying taxes?]]

The problem that you are having is that LLPs are basically generated under state law. But for federal tax purposes, a llp follows the sam entity classification rules as a limited liability company (LLC). The LLP may eledt to be taxed as a corporation by filing Form 8832 and will be required to file Form 1120. If no election is made, the LLP wil be treated as a partnership and will file Form 1065.

If you want to read up about partnership laws, check out IRS Publication 541 at the IRS web site. I would then suggest that you take your questions to a qualified tax pro for additional discussion.

[[ Maybe I am making this harder than it is, my tax guy says not
to worry once we make a profit we will pay taxes. This worries me. Thanks]]

That kind of answer would worry me also. You would think that he would take the time to explain these issues to you...don't you? I've seen very few good things happen when you ask your accountant a specific and valid question (which yours are), and you get the standard "don't worry about it" response. Means s/he doesn't know or doesn't care. Neither is good.

TMF Taxes
Roy
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Most, but not all LLP/LLC's elect to be treated as a Partnership for federal taxation purposes (as TMFTaxes pointed out). If this is the case, you will receive a Schedule K-1 from the LLP once a year I am assuming you are one of the owners). As an over simplification, a Schedule K-1 is somewhat like a complex W-2 in that it sends you / charges you with income items like earnings, interest, dividends, cap gains, & self-employment income. All this stuff gets posted into different areas of your personal 1040 tax return.

On the presumption that this entity is a real active entity & a going concern, then 1st year losses are always nice because they "flow through" to you as the individual taxpayer & more often than not, reduce your tax burden.

Next year, when the LLP starts showing a profit, it gets trickier. IMHO, either beat up your accountant for some good detailed answers and/or head for the book store & pick up something like "Running A Business As A Partnership" or "Doing Busines As An "S" Corporation". Although these texts (titles are made up) will not be 100% accurate, they will give a general lay of the land & will 95% accurate.

Finally, in most cases, but not every case an LLP/LLC is really a Partnership & is treated as such at the Federal & State levels. The purpose of forming as an LLP/LLC is to operate & report as a Partnership while gaining the "limited liability" features of a corporation.

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