By default, the IRS does not tax a single-member LLC as its own entity. It treats the business as a “disregarded entity,” which means the profits and losses land on your personal Form 1040, you report them on Schedule C, and you pay ordinary income tax plus 15.3% self-employment tax on the net earnings. You can override that default by electing S corporation or C corporation treatment, but most single-owner LLCs stay on the default track. Here is how a single-member LLC is taxed under each option, and what you owe and file along the way.
The Default: Disregarded Entity
When you form a single-member LLC and file nothing else, the IRS classifies it as a disregarded entity under Treasury Regulation Section 301.7701-3.1eCFR. 26 CFR 301.7701-3 – Classification of Certain Business Entities For federal income tax, the LLC is invisible. The government looks straight through it and treats you as a sole proprietor.
That means the LLC itself files no income tax return and owes no income tax. You calculate net profit by subtracting business expenses from gross receipts and report the result on Schedule C attached to your Form 1040.2Internal Revenue Service. About Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship) That profit gets added to any wages, interest, or investment income you have, and the combined total sets your federal income tax bracket.
Self-Employment Tax
On top of income tax, you owe self-employment tax to cover Social Security and Medicare, because no employer is withholding those from a paycheck. You pay both the employer and employee halves.3Internal Revenue Service. Topic No. 554, Self-Employment Tax The combined rate is 15.3%, split into two pieces:4Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax
- Social Security at 12.4%, on net self-employment earnings up to $184,500 in 2026. Earnings above that cap are not subject to this portion.5Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet
- Medicare at 2.9%, on all net earnings with no cap. An additional 0.9% applies to earnings above $200,000 (single) or $250,000 (married filing jointly).6Internal Revenue Service. Topic No. 560, Additional Medicare Tax
The tax is applied to 92.35% of your net earnings, not 100%, because traditional employers pay half of these taxes for their workers and the formula mirrors that.3Internal Revenue Service. Topic No. 554, Self-Employment Tax You run the numbers on Schedule SE, filed with your 1040.
You can then deduct the employer-equivalent half of the SE tax when figuring your adjusted gross income. It is an above-the-line deduction, available whether or not you itemize. It cuts your income tax but does not reduce the SE tax itself.7Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
Quarterly Estimated Payments
Because nobody withholds tax from your LLC income, you generally have to send the IRS estimated payments four times a year if you expect to owe $1,000 or more at filing.8Internal Revenue Service. Estimated Taxes These payments cover both income tax and SE tax. You calculate and remit them on Form 1040-ES.
For the 2026 tax year, the deadlines are April 15, 2026, June 15, 2026, September 15, 2026, and January 15, 2027.9Internal Revenue Service. Form 1040-ES – 2026 You can skip the January 15 payment if you file the full 2026 return and pay the balance by February 1, 2027.
Underpayment triggers interest, currently at 7% per year, compounded daily.10Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026 You generally avoid penalties by paying at least 90% of your current-year tax or 100% of the prior year’s tax (110% if your prior-year AGI was over $150,000).11Internal Revenue Service. Estimated Tax
Deductions That Matter Most
Qualified Business Income Deduction
Under Section 199A, eligible SMLLC owners can deduct up to 20% of qualified business income from taxable income.12Internal Revenue Service. Qualified Business Income Deduction The deduction had been scheduled to expire after 2025, but the One Big Beautiful Bill Act, signed July 4, 2025, extended it into 2026 and beyond.13Internal Revenue Service. One, Big, Beautiful Bill Act – Tax Deductions for Working Americans and Seniors
If your taxable income is below roughly $200,000 (single) or $400,000 (joint) in 2026, you generally get the full 20% without restriction. Above those thresholds the deduction phases out over a range of about $75,000 (single) or $150,000 (joint), and service businesses such as law, consulting, and accounting face steeper limits at higher incomes. The QBI deduction reduces income tax only. It does not touch your SE tax.
Home Office
If you use part of your home regularly and exclusively for the LLC, you can take a home office deduction. The simplified method is $5 per square foot up to 300 square feet, for a maximum of $1,500.14Internal Revenue Service. Simplified Option for Home Office Deduction The regular method uses actual expenses like mortgage interest, utilities, insurance, and repairs, and can produce a larger deduction if you keep the records.
Electing Corporate Tax Treatment
The default suits most single-owner LLCs, but you can elect to be taxed as a corporation if the math favors it.
S Corporation
Filing Form 2553 lets your SMLLC be taxed as an S corporation while keeping pass-through treatment.15Internal Revenue Service. Instructions for Form 2553 To take effect for the current tax year, the form must be filed no more than two months and 15 days after the tax year begins. You can also file it anytime during the prior year.
As an S corp owner-employee, you run payroll and pay yourself a reasonable salary subject to Social Security and Medicare taxes. Profits above that salary come out as distributions, which are not subject to self-employment tax. That is where the savings sit. The catch is that the IRS scrutinizes whether the salary is genuinely reasonable, weighing your training and experience, your duties, comparable pay at similar businesses, and the time you put in.16Internal Revenue Service. S Corporation Compensation and Medical Insurance Issues Lowballing your salary to shrink the payroll tax base draws audit risk.
The election also adds work: payroll, quarterly payroll returns, and a separate Form 1120-S. For many owners, the SE tax savings only exceed the added cost once net profit is consistently in the $40,000 to $50,000 range or higher, though the breakeven varies.
C Corporation
Filing Form 8832 lets your SMLLC be taxed as a C corporation.17Internal Revenue Service. About Form 8832, Entity Classification Election The LLC then pays a flat 21% federal corporate tax on its profits.18Office of the Law Revision Counsel. 26 USC 11 – Tax Imposed Any profits you distribute to yourself as dividends are taxed again on your personal return. This double layer makes the C corp election uncommon for a single-owner business, though it can fit narrow cases such as retaining significant profit inside the company when 21% beats your personal rate.
Forms, Records, and Filing Deadlines
Under the default classification, your annual filing package includes Schedule C (income and expenses), Schedule SE (self-employment tax), and Form 1040-ES for quarterly estimates during the year.2Internal Revenue Service. About Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship)
The 2025 return is due April 15, 2026.19Internal Revenue Service. Individual Tax Filing Form 4868 gives you an automatic six-month extension to file, pushing the deadline to October 15, 2026. It does not extend the time to pay; any balance due after April 15 accrues interest and penalties.20Internal Revenue Service. Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return
The failure-to-pay penalty is 0.5% of the unpaid balance per month or partial month, up to 25%.21Internal Revenue Service. Failure to Pay Penalty It drops to 0.25% per month once you have an approved payment plan. Interest runs on top of the penalty at the IRS’s current quarterly rate.
Keep records supporting your return for at least three years from the filing date.22Internal Revenue Service. How Long Should I Keep Records? Longer retention applies in specific situations, including six years if you underreport income by more than 25%.
What Changes When You Hire Employees
A disregarded SMLLC with no employees and no excise tax obligations can operate under your Social Security number. That ends the day you hire someone. The LLC has to obtain an EIN, and for employment tax purposes the IRS treats the LLC as a separate entity, even though it remains disregarded for income tax.23Internal Revenue Service. Single Member Limited Liability Companies
You then withhold federal income tax, Social Security, and Medicare from your employees’ wages, pay the employer share, and file Form 941 quarterly.24Internal Revenue Service. Instructions for Form 941 (Rev. March 2026) The LLC’s name and EIN, not your personal information, must appear on those employment tax filings and payments.