LLC guide · Keep it running
How LLC taxes work.
An LLC does not have one tax treatment. The IRS treats it based on how many members it has, unless you choose otherwise. Here is how each path works.
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The short version
- Single-member LLCs report profit on the owner's personal return by default.
- Multi-member LLCs file a partnership return and issue K-1s.
- Owners usually pay self-employment tax on their share of profit.
- An LLC can elect S corp or C corp taxation when it makes sense.
Single-member LLCs
By default the IRS treats a single-member LLC owned by a person as a disregarded entity. The business does not file its own income tax return. Instead, the owner reports its income and expenses on their personal return, usually on Schedule C.
Multi-member LLCs
An LLC with two or more members is taxed as a partnership by default. The LLC files Form 1065, an information return, and gives each member a Schedule K-1 showing their share of income, deductions, and credits. Members report those amounts on their own returns. The LLC itself generally does not pay federal income tax.
Self-employment tax and estimated payments
Under default treatment, members who work in the business generally owe self-employment tax on their share of net earnings. It covers Social Security and Medicare, and half of it is deductible.
Because no employer is withholding, owners who expect to owe usually make quarterly estimated tax payments during the year rather than paying everything at filing time.
Electing S corp or C corp taxation
An LLC can choose to be taxed as a corporation. With an S corporation election on Form 2553, working owners take a reasonable salary through payroll, and profit above that can be distributed without self-employment tax. With a C corporation election on Form 8832, the business pays its own corporate income tax.
Each election adds work and has deadlines and eligibility rules. Read LLC vs. S corp and talk to a tax professional with your real numbers.
If you hire employees
An LLC with employees withholds income tax and payroll taxes, files employment tax returns, and issues W-2s, using its own EIN. Contractors get a Form 1099 instead when the rules require one.
State and local taxes
- State income tax on the profit that passes through to members, in states that have one.
- Franchise, privilege, or gross receipts taxes in some states.
- Sales tax if you sell taxable goods or services, which needs a sales tax permit.
- Local business taxes in some cities and counties.
Records make tax time easier
Run all business money through a business bank account, keep receipts, and categorize expenses as you go. Clean bookkeeping is what lets a tax professional find every deduction.
This guide is general information, not legal or tax advice. Rules differ by state and change over time, so check your state's official website or a licensed professional before you act. YaH Brands is not a law firm or an accounting firm.
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Services for this step
Every service is available on its own. Add only what your business needs.
- Taxes & accounting referral servicesConnect with an independent tax or accounting professional.
- BookkeepingTurn scattered transactions into usable records.
- S-corporation election assistanceOrganize the tax election you instruct us to submit.
- EIN application assistanceGet oriented to your business tax ID application.
- Sales tax permit assistanceGet clear on sales tax registration steps.
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Common questions
Under default treatment, generally not at the federal level. Profit passes through to the members. Some states charge the LLC its own franchise or privilege tax.
For calendar-year businesses, Form 1065 is generally due on the fifteenth day of the third month after year end. Extensions are available.
It can save on self-employment tax once profit is steady, but it adds payroll and filing costs. A tax professional can run the comparison with your figures.