#3 - HOW IS AN LLC TAXED - COMPREHENSIVE GUIDE - LLC

A limited liability company (LLC) doesn't pay taxes at the business level. Instead, LLC pay passes through to the member's personal annual tax return.

This allows LLCs to avoid the double taxation of a corporation while still enjoying the benefit of limited liability insurance.

Get comfortable with the basics in our How is a LLC Taxed guide underneath.

LLC Tax Basics

As per the usual way of doing things, LLCs are treated as a pass-through substance for federal personal tax purposes. This means LLCs don't pay federal annual taxes at the business level. LLC pay passes through to members' personal annual tax returns based on their degree of ownership as it's laid out in the LLC operating agreement. The compensation is then subject to individual annual tax rates.

Payments made to a registered agent are called distributions or draws. Distributions are subject to self-business taxes. For some LLCs, it could look at to choose S corporation tax status to reduce self-work taxes.

Single-Member LLC Taxes

Single-member LLCs are taxed by the IRS as "Disregarded Entities." This just means the IRS ignores the structure of your business (i.e., the way that it's a single-member LLC) and taxes you as it does a sole proprietorship. The LLC's compensation is reported on your personal tax return toward the year's end.

With your LLC pay, you can pay yourself with a distribution. You should pay self-work taxes on your distribution but, because you previously paid personal tax on the LLC's absolute profits, you don't have to pay annual tax on the distribution. This process is gotten a handle on extra in our How Would I Pay Myself From My LLC guide.

Multi-Member LLC Taxes

A multi-member LLC is generally taxed as a partnership by the IRS. This means that LLCs don't pay federal annual taxes to the IRS and all profits are passed through to the members of the LLC as indicated by the partnership operating agreement. The members of the LLC with an EIN number then pay the taxes to the IRS on their individual tax returns.

Like single-member LLCs, each owner in a multi-member LLC can take a distribution from their share of the LLC's profits. This process is gotten a handle on extra in our How Would I Pay Myself From My LLC guide.

A limited liability company (LLC) doesn't pay taxes at the business level. Instead, LLC pay passes through to the member's personal annual tax return. This allows LLCs to avoid the double taxation of a corporation while still enjoying the benefit of limited liability insurance. Get comfortable with the basics in our How is a LLC Taxed guide underneath. ![](https://www.projectcubicle.com/wp-content/uploads/2022/05/llc.png) LLC Tax Basics As per the usual way of doing things, LLCs are treated as a pass-through substance for federal personal tax purposes. This means LLCs don't pay federal annual taxes at the business level. LLC pay passes through to members' personal annual tax returns based on their degree of ownership as it's laid out in the LLC operating agreement. The compensation is then subject to individual annual tax rates. Payments made to a [registered agent](https://registeredagentva.org/) are called distributions or draws. Distributions are subject to self-business taxes. For some LLCs, it could look at to choose S corporation tax status to reduce self-work taxes. Single-Member LLC Taxes Single-member LLCs are taxed by the IRS as "Disregarded Entities." This just means the IRS ignores the structure of your business (i.e., the way that it's a single-member LLC) and taxes you as it does a sole proprietorship. The LLC's compensation is reported on your personal tax return toward the year's end. With your LLC pay, you can pay yourself with a distribution. You should pay self-work taxes on your distribution but, because you previously paid personal tax on the LLC's absolute profits, you don't have to pay annual tax on the distribution. This process is gotten a handle on extra in our How Would I Pay Myself From My LLC guide. Multi-Member LLC Taxes A multi-member LLC is generally taxed as a partnership by the IRS. This means that LLCs don't pay federal annual taxes to the IRS and all profits are passed through to the members of the LLC as indicated by the partnership operating agreement. The members of the LLC with an [EIN number](https://registeredagentva.org/) then pay the taxes to the IRS on their individual tax returns. Like single-member LLCs, each owner in a multi-member LLC can take a distribution from their share of the LLC's profits. This process is gotten a handle on extra in our How Would I Pay Myself From My LLC guide.

#3 HOW IS AN LLC TAXED - COMPREHENSIVE GUIDE