{"id":4825,"date":"2016-04-04T10:47:45","date_gmt":"2016-04-04T15:47:45","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/incorporation-and-legal-structures\/filing-llc-taxes.html"},"modified":"2025-10-23T22:43:00","modified_gmt":"2025-10-24T03:43:00","slug":"filing-llc-taxes","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/incorporation-and-legal-structures\/filing-llc-taxes.html","title":{"rendered":"Filing LLC Taxes"},"content":{"rendered":"\n
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Filing LLC Taxes<\/h1>\n\n
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\n By Jade Yeban, Esq.<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Limited liability companies<\/span> by default are pass-through entities, meaning the business profits and losses are not taxed at the company level but \u201cpass through\u201d to the LLC members who report them on their individual tax returns<\/span>.<\/p>\n\n <\/div>\n\n\n\n

When you run a small business<\/span>, it\u2019s crucial to\u00a0understand taxes. If your business is a\u00a0limited liability company<\/span><\/a>\u00a0(LLC), the way you file taxes can vary. The Internal Revenue Service (IRS<\/span>) usually treats an LLC as a pass-through entity for federal tax purposes. Pass-through taxation means that the business\u2019s profits and losses pass through the company to individual members. Rather than the company, the individual members must report the members\u2019 share of the profits on their individual tax returns<\/span>.<\/p>\n

On rare occasions, an LLC\u2019s members will choose to be treated as a\u00a0corporation<\/a>\u00a0for federal tax purposes. However, in most cases, businesses structure themselves as LLCs to enjoy the same pass-through tax status as sole proprietorships<\/span> and\u00a0partnerships<\/a>.<\/p>\n

This article will explain how LLCs are taxed and guide you through different aspects of LLC<\/span><\/a> tax<\/span> filing<\/span>. Whether you\u2019re a sole proprietor<\/span> with a single-member LLC<\/span> or part of a multi-member LLC<\/span>, you\u2019ll learn about federal and state tax requirements, tax deductions, and more in this article.<\/p>\n

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How Are LLCs Taxed?<\/h2>\n

An LLC<\/a> is a flexible business entity<\/span> with pass-through taxation. Pass-through taxation is a benefit that is available for business owners<\/span> who choose the LLC business structure<\/span> to avoid double taxation<\/span>.\u00a0Double taxation<\/span><\/a>\u00a0happens with corporations when the business itself pays tax on its income, and that income is taxed a second time when it is distributed to the shareholders.<\/p>\n

When an LLC<\/a> chooses pass-through taxation, the owners will report the business\u2019s income or losses on their personal <\/span>income <\/span>tax<\/span> return<\/span> instead of the business paying the tax on its income. Essentially, the business\u2019s income is treated as the personal income of the LLC members for federal income tax purposes<\/span>.<\/p>\n

Filing Federal Tax Returns<\/span> as a Single-Member LLC<\/span><\/h2>\n

When an\u00a0LLC<\/a>\u00a0has a sole owner, the IRS<\/span> automatically classifies it as a sole proprietorship<\/span> for tax filing<\/span> purposes. This is called a single-member LLC<\/span>. The single LLC owner<\/span> must file a Form 1040 income <\/span>tax return<\/span> and report business income<\/span> and losses on a\u00a0Schedule C<\/span>, Profit or Loss From a Business<\/a>. Schedule C<\/span> is attached to your personal federal income <\/span>tax return<\/span>.<\/p>\n

Remember to keep track of tax information<\/span>, such as all business expenses<\/a>, because they can lead to valuable tax deductions. It\u2019s also important to keep your personal and business bank account<\/span> information separate for tax purposes.<\/p>\n

Filing Federal Tax Returns<\/span> as a Multiple-Member LLC<\/h2>\n

For a multi-member LLC<\/span>, each member files their share of income on a personal <\/span>tax return<\/span>. The LLC must file an informational return on\u00a0Form 1065, U.S. Partnership Return<\/span> of Income<\/a>, including a\u00a0Schedule K-1<\/span><\/a>. The Schedule K-1<\/span> is used to report the total income and losses that pass through to the members. Each member must then report that information on their personal tax form<\/span>, Form 1040 and attach a Schedule E, Supplemental Income and Loss.<\/p>\n

The IRS<\/span> automatically taxes an LLC with more than one member in the same manner as a partnership unless the LLC opts for tax classification<\/span> and treatment as a corporation. For this reason, it\u2019s essential for members of an LLC to agree on how to allocate income and expenses. The IRS<\/span> requires LLC members to pay taxes on their distributive share, which is equal to the percentage of each member\u2019s interest in the company.<\/p>\n

An LLC can distribute its profits as a special allocation<\/a> where one or more members get more than their distributive share and other members get less. However, unless the company can show an economic reason for the special allocation, each member will still be taxed on their distributive share of the income.<\/p>\n

Paying Estimated Taxes<\/span><\/h2>\n

An employee as a taxpayer<\/span> usually pays much of their state and federal taxes through withholdings from their paycheck, but\u00a0because no taxes are withheld from the profit distributions made to members in an LLC, the members must pay\u00a0estimated taxes<\/span>\u00a0<\/a>on a quarterly basis to the IRS<\/span>.<\/p>\n

A member\u2019s tax payments<\/span> are based on rough estimates of the tax they will owe at year\u2019s end, and you should receive a refund of any overpayments made during the year after you have filed your personal <\/span>tax return<\/span>. Small <\/span>business<\/span> owners<\/span>, including LLC members, often need to pay estimated taxes<\/span> quarterly. Estimated taxes<\/span> cover income tax and self-employment taxes<\/span>.<\/p>\n

Paying Self-Employment Taxes<\/span><\/h2>\n

The IRS<\/span> requires LLC members to pay the federal\u00a0self-employment tax<\/span><\/a>\u00a0on the profits received by the company if they have been active in the business. The self-employment taxes<\/span> will cover both the employee and employer\u2019s portion of the Social Security and Medicare taxes that an employee owes. The\u00a0self-employment <\/span>tax<\/span> rate<\/span> as of 2025\u00a0is 15.3%.<\/p>\n

As a general rule, the self-employment tax<\/span> applies when a member participates in the business and is not a limited partner. It also applies when the member works in an LLC that is a professional service business in the field of health, law, engineering, architecture, accounting, actuarial, or consulting. The IRS<\/span> may not require non-active LLC members to pay self-employment taxes<\/span>.<\/p>\n

Members must report self-employment taxes<\/span> on a\u00a0Schedule SE<\/a>. LLC members are responsible for paying the entire 15.3% (12.4% for Social Security and 2.9% for Medicare). Members can deduct half of the self-employment tax<\/span> paid from their adjusted gross income.<\/p>\n

Electing Corporate Tax<\/span> Treatment<\/h2>\n

Some LLCs choose to be taxed as a\u00a0C-corporation<\/span><\/a>\u00a0(C-corp<\/span>). This means the LLC pays corporate income tax<\/span> on profits. Any dividends paid to members are also taxed at their individual rates. Electing as a C-corp<\/span> can be beneficial for businesses that plan to reinvest their profits rather than distribute them. An LLC can choose corporate tax<\/span> treatment to reinvest earnings at a lower tax rate<\/span>.<\/p>\n

The corporate tax<\/span> option may be beneficial if the LLC chooses to keep a significant amount of profits in the business to contribute to its growth. That is because the corporate <\/span>tax<\/span> rate<\/span> is generally lower than the individual income <\/span>tax<\/span> rate<\/span> would be on that income if it was distributed, and since there is no distribution, those profits are not double-taxed as income to the members.<\/p>\n

An LLC may elect corporate tax<\/span> treatment by filing a\u00a0Form 8832<\/span>, Entity Classification Election<\/a>, with the IRS<\/span>. The LLC must also file\u00a0<\/span>Form<\/span> 1120<\/span>, U.S. Corporation <\/span>Income <\/span>Tax<\/span> Return<\/span><\/a>, each year the election applies.<\/p>\n

Filing State Income Taxes<\/h2>\n

LLC members must also\u00a0file state income <\/span>tax returns<\/span><\/a>. Like the federal government, most states allow LLC members to pay taxes on profits through personal <\/span>tax returns<\/span>. A few states also require members to pay an additional tax on the income made by the LLC.<\/p>\n

For instance, in some states, a member may have to pay a tax on LLC income<\/span> that exceeds a certain amount. Other states may require the LLC to pay an annual fee, sometimes called a\u00a0franchise tax<\/span>\u00a0or a\u00a0renewal fee.<\/p>\n

Since the requirements vary, it\u2019s important to understand your state\u2019s laws. These laws include rules regarding business taxes<\/span>, sales tax, and any state-specific tax credits<\/span> you might qualify for.<\/p>\n

Tax Deductions for LLCs<\/h2>\n

Understanding tax deductions is key for a small <\/span>business<\/span> owner<\/span> to minimize tax liability<\/span>. As an LLC, you can deduct legitimate business expenses from your income. This includes costs like office supplies, business travel, advertising, and employee salaries. Additionally, home office deductions are available if you use part of your home exclusively for business. It\u2019s important to keep detailed records of all expenses to substantiate these deductions.<\/p>\n

Newer\u00a0tax laws<\/span><\/a>\u00a0may also offer specific deductions, like the\u00a0Qualified Business Income<\/span> Deduction<\/a>. This can significantly reduce taxable income for eligible small businesses<\/span>. Consulting a tax professional can help you identify and maximize these deductions for your LLC.<\/p>\n

LLC Tax<\/span> Questions? Get Peace of Mind With a Tax Attorney\u2019s Help<\/h2>\n

There is some flexibility when it comes to paying your LLC taxes<\/span>. There are advantages and disadvantages to paying as a sole proprietorship<\/span>, partnership, or corporation. Sitting down with a qualified tax attorney for legal advice<\/span> can help you determine which one works best for you.<\/p>\n

Speak with a\u00a0tax law<\/span> attorney<\/a>\u00a0near\u00a0you today.<\/p>\n\n\n

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