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First time business owner, how does estimated tax work and legal repercussion if I withdraw once a year?

by 452, Window Shopper

  • Created: January 11, 2013, 12:00 am
  • Updated: January 11, 2013, 12:03 am
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2 comments
I've setup an LLC as myself as the sole owner. This is my first year so I'm trying to learn everything. I have a full time job and do freelancing on the side, the LLC is for the freelancing. Because I make enough at my day job to cover everything, I don't plan on withdrawing money from my LLC's bank account until the end of the year (December 31st). Based on my research, even-though the money isn't in my bank account yet, I still would have to pay quarterly estimated taxes on money that comes into the LLC each quarter. I assume I would file the 1040-ES using my SSN and money from my own bank account. If I do it this way, meaning paying estimated taxes from my account before receiving the actual money because its not the end of the year where I plan to withdraw it, can this be used as a way to pierce the corporate veil? I also assume that I don't have to pay quarterly estimated taxes again when I transfer money from my LLC to my bank account since I've already paid the quarterly coming into the LLC. Since the LLC is considered a pass-through entity and profits isn't double taxed?
Tags: Discuss Popular Topics, Filing and Paying Taxes
‹ Tax Exempt Estimate tax payment in refund situation? ›

BizResearcher | Window Shopper | 1/16/2013 - 11:42 am

The IRS requires that you have 90% of your anticipated tax liability prepaid,
either through withholdings from income earned at a job or by paying
estimated tax. If you usually receive a tax refund, then your full time job
may be covering your tax liability. Therefore, before you make an estimated
tax payment for the 4th quarter, you may want to determine if it is
necessary.

If, as a one-person LLC, you will file a Schedule C with your personal taxes
to report your business income and expenses, it doesn't matter which account
you use, business or personal, to pay the estimated tax. The estimated tax
payment will be credited against your total personal tax liability.

kmurray | Community Moderator | 1/11/2013 - 6:23 pm

Hi, Consulting a tax professional with these specific questions would be a great option. The SBA also has resource partners like SCORE, Women’s Business Centers and Small Business Development Centers located across the country, which provide free business counseling to individuals looking to start or expand a small business. These organizations can help you with the process of starting your business. Visit our local assistance guideto find your local SBA resource partners by entering your zip code.