An LLC’s federal tax bill depends almost entirely on how the IRS classifies it, and for most LLCs that means the business itself pays no income tax at all. So the real question of what taxes an LLC has to pay is answered at the owner level: members typically owe federal income tax on their share of profits, 15.3% self-employment tax on their net earnings, and quarterly estimated payments to cover both. Add payroll taxes if the LLC has employees, and in almost every state a layer of franchise fees, income tax, or sales tax on top.
Federal Income Tax Depends on Classification
The IRS has no dedicated tax category for LLCs. It assigns a default based on the number of members and lets the business elect a different treatment if that works better.
Single-Member LLCs
A one-owner LLC is treated as a “disregarded entity.” The IRS looks straight through to the owner, who reports all business income and expenses on Schedule C of Form 1040, the same way a sole proprietor does.1Internal Revenue Service. Single Member Limited Liability Companies The LLC files no separate income tax return and pays no income tax of its own.
Multi-Member LLCs
An LLC with two or more members is classified as a partnership by default.2Internal Revenue Service. LLC Filing as a Corporation or Partnership The LLC files Form 1065 as an informational return and pays no entity-level income tax. Each member receives a Schedule K-1 showing their share of profits, losses, deductions, and credits, and reports those figures on a personal return.3Internal Revenue Service. About Form 1065, U.S. Return of Partnership Income
Electing Corporate Treatment
Any LLC can override its default classification through the check-the-box regulations by filing Form 8832.4eCFR. 26 CFR 301.7701-3 – Classification of Certain Business Entities Electing C-corporation status means the LLC pays federal income tax at the flat 21% corporate rate on Form 1120, and any profits distributed to members as dividends are taxed a second time on their personal returns.5Internal Revenue Service. About Form 8832, Entity Classification Election That double tax is what pass-through classifications avoid.
An LLC can instead elect S-corporation treatment by filing Form 2553, provided it has no more than 100 shareholders, only one class of stock, and no shareholders that are partnerships, other corporations, or nonresident aliens.6Internal Revenue Service. S Corporations An S-corp files Form 1120-S but pays no entity-level income tax; profits flow through to the members.
The main draw of the S-corp election is a lower self-employment tax bill. Owner-employees must draw a reasonable salary and the LLC withholds payroll taxes on that salary as any employer would.7Internal Revenue Service. S Corporation Compensation and Medical Insurance Issues Profits distributed beyond the salary are not subject to self-employment tax. The IRS can reclassify distributions as wages if it finds the salary was unreasonably low, so the pay has to reflect what the same work would cost on the open market.
Self-Employment Tax
If your LLC is taxed as a sole proprietorship or partnership, you owe self-employment tax on your share of net earnings. This tax funds Social Security and Medicare and applies because LLC members are not employees; no one is withholding these amounts from your pay.8Internal Revenue Service. Self-Employment Tax and Partners
The combined rate is 15.3%, made up of two pieces:9Internal Revenue Service. Topic No. 554, Self-Employment Tax
- Social Security (OASDI) at 12.4% on net earnings up to $184,500 in 202610Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet
- Medicare at 2.9% on all net earnings, with no cap11Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax
You pay both halves because you are effectively employer and employee. The obligation kicks in once net self-employment earnings reach $400 for the year.12Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) Calculate and report the tax on Schedule SE attached to Form 1040.
Higher earners owe an additional 0.9% Medicare surtax on self-employment earnings and wages above $200,000 for single filers or $250,000 for joint filers. Compute it on Form 8959.13Internal Revenue Service. Instructions for Form 8959 – Additional Medicare Tax The surtax falls entirely on the individual; there is no employer match.
You can deduct half of your self-employment tax when figuring adjusted gross income, whether or not you itemize. Claim it on Schedule 1 of Form 1040.9Internal Revenue Service. Topic No. 554, Self-Employment Tax The deduction lowers your income tax, not the self-employment tax itself.
The 20% Qualified Business Income Deduction
LLC members whose business is taxed as a sole proprietorship, partnership, or S-corporation can deduct up to 20% of qualified business income from taxable income. Section 199A created the deduction, which recent legislation made permanent, and it can meaningfully lower the effective tax rate on pass-through profits. Claim it on Form 8995 or 8995-A without itemizing.
The full deduction is available in 2026 to single filers with taxable income at or below roughly $201,800 and joint filers at or below roughly $403,500. Above those thresholds the deduction phases out based on the wages your LLC pays and the value of its depreciable property, over a range of $75,000 for single filers and $150,000 for joint filers.
Certain professional service businesses, including health care, law, accounting, consulting, financial services, and athletics, face tighter rules.14Internal Revenue Service. Instructions for Form 8995 Within the phase-out range only part of the income from these fields qualifies, and above the top of the range the deduction disappears entirely for them.
Estimated Quarterly Payments
No one is withholding income or self-employment tax from an LLC member’s earnings, so you generally have to make estimated payments four times a year on Form 1040-ES. The IRS expects them if you will owe $1,000 or more at filing.
The 2026 due dates:15Internal Revenue Service. Form 1040-ES, Estimated Tax for Individuals
- April 15, 2026
- June 15, 2026
- September 15, 2026
- January 15, 2027
You can skip the January installment if you file your 2026 return and pay the balance by February 1, 2027.15Internal Revenue Service. Form 1040-ES, Estimated Tax for Individuals
To avoid an underpayment penalty, total payments for the year must reach at least the smaller of 90% of your 2026 tax liability or 100% of the tax on your 2025 return. If your 2025 adjusted gross income exceeded $150,000 ($75,000 if married filing separately), the prior-year safe harbor rises to 110%.15Internal Revenue Service. Form 1040-ES, Estimated Tax for Individuals Missing a deadline or underpaying triggers interest charged by the quarter.
Payroll Taxes If the LLC Has Employees
Hiring non-owner employees brings payroll tax responsibilities under FICA. The LLC withholds a share from wages and matches it:16Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
- Social Security at 6.2% withheld plus 6.2% employer share on wages up to $184,500 in 202610Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet
- Medicare at 1.45% withheld plus 1.45% employer share, no wage cap16Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
These amounts are reported quarterly on Form 941. The LLC also withholds federal income tax from each paycheck based on the worker’s W-4 and deposits the combined amounts on the schedule the IRS assigns, either monthly or semi-weekly, depending on total liability.
Federal unemployment tax applies too. The statutory FUTA rate is 6.0% on the first $7,000 of wages paid to each employee per year, but employers who pay their state unemployment taxes on time get a 5.4% credit, bringing the effective rate to 0.6%.17Internal Revenue Service. FUTA Credit Reduction Report and pay FUTA annually on Form 940, due by January 31 of the following year.18Internal Revenue Service. Topic No. 759, Form 940 – Employer’s Annual Federal Unemployment (FUTA) Tax Return Every state also runs its own unemployment insurance program funded by employer contributions, with a starting rate that varies by state and industry.
State and Local Taxes
Federal taxes are only part of the bill. Most states add their own layer, and the mix varies.
Annual Fees and Franchise Taxes
Many states charge an annual fee or franchise tax for the privilege of existing as an LLC, whether or not the business earned anything. Flat fees range from under $50 to $800 or more; some states base the tax on revenue or assets instead. Not paying can lead the state to administratively dissolve the LLC, which strips limited liability protection until the entity is reinstated. Separately, most states require an annual or biennial report to the Secretary of State, often with a filing fee ranging from under $10 to several hundred dollars.
State Income Tax
In states with an income tax, members owe state income tax on their share of profits, mirroring the federal treatment. Some states also levy an entity-level tax on the LLC itself even when it is a pass-through federally, so the business pays a state tax and the members pay again on their share. Rates and deadlines vary; check your state’s revenue department.
Sales and Use Tax
LLCs that sell tangible goods or certain taxable services must collect sales tax from customers and remit it to the state. The duty to collect is triggered by nexus, meaning a sufficient connection through physical presence, employees, inventory, or economic activity. Even online sellers without a physical location can be required to collect once they cross a state’s economic threshold; the most common is $100,000 in gross sales or 200 transactions per year, though the exact figures vary. Five states have no statewide sales tax.
Your LLC owes use tax at the same rate when it buys equipment, supplies, or other taxable items from an out-of-state seller that did not charge sales tax. Keep detailed purchase records for state audits. Failing to collect and remit sales tax you were required to collect can result in back taxes, penalties, interest, and in some states personal liability for the LLC’s owners even though the business normally shields them.