You need to consult your attorney to determine the liability protection that an LLC will provide to you. Your tax benefits will depend upon how the LLC is taxed.
An employer identification number (EIN) is not required to operate a business as a sole proprietor. Some banks may require an EIN to open a business checking account. An EIN will also be required if you have payroll or file a federal excise tax return (such as Heavy Highway Vehicle Use Tax for commercial vehicles).
It depends upon the type of LLC. A single member LLC is an entity that is disregarded by the IRS and will report its income and expenses on a schedule that is attached to the 1040. A multi member LLC will file a partnership tax return and each member’s share of the profit will be reported to them on a Schedule K-1. The amounts on the Schedule K-1 will then be reported on the member’s 1040.
An LLC can also elect to be taxed as either an S-corporation or C-corporation. An S-corporation will file a corporate tax return and each member’s share of the profit will be reported on a Schedule K-1. The amounts on the K-1 will then be reported on the member’s 1040. A C-corporation will file a corporate tax return and will pay taxes with the tax return.
Your tax preparer will help you determine which structure will be best for you.
In PA, generally the purchase of an item by the ultimate consumer is subject to sales tax. Likewise, services performed on taxable items are subject to sales tax, along with some specifically designated services set forth in the law.
Major items exempt from sales tax include food (not ready-to-eat), most clothing, medication, sales for resale, and residential heating fuels. PA Publication REV-717, Retailer’s Information Guide, has detailed information concerning which items are subject to sales tax.
In addition to PA sales tax, a local sales tax of 1 percent is collected on sales in Allegheny County and 2 percent is collected in Philadelphia.
Other states charge sales tax differently than PA, so you should consult with your tax professional if doing business in other states.
