can llc have retained earnings
Profits of an LLC are generally distributed to the shareholders in the same fashion as a general partnership. Any profits that are not distributed at the end of the LLC's tax year are considered retained earnings. The IRS has specific rules that pertain to the tax treatment of excess retained earnings. Once retained earnings hit a certain threshold, the excess accumulation can be taxed unless the corporation can justify the accumulation. How Retained Earnings Works Like a partnership, an LLC records its income and expenses and then passes the net profit or loss to the individual shareholders based on the shareholders percentage of stock ownership.
Choosing a Tax Structure for Your LLC Unlike a corporation (like a C-Corp or S-Corp), a Limited Liability Company is not a separate taxable entity. The IRS refers to LLCs as âpass-through entities,â which simply means that the tax liabilities of the company âpass throughâ to you and your co-owners personal income tax.