LLC taxes: How to file and manage your LLC tax obligations

Published Friday 12 December 2025

Table of contents

• The basics of LLC taxation
• LLC tax benefits and advantages
• Filing income taxes for a single-member LLC
• Filing income taxes for a multi-member LLC taxed as a partnership
• Filing income taxes for a C corporation
• Filing income taxes for an S Corporation
• Ways to reduce LLC taxes
• Other taxes for LLCs
• Manage your LLC taxes with confidence
• FAQs on LLC taxes

Key takeaways

• Understand that LLCs default to pass-through taxation where business income flows directly to your personal tax return, but you can elect different tax treatments like S corp or C corp status by filing specific IRS forms to optimize your tax burden.

• File the appropriate tax forms based on your LLC structure: single-member LLCs report income on Schedule C of Form 1040, while multi-member LLCs file Form 1065 and issue Schedule K-1s to members who then report their share on personal returns.

• Maximize your tax deductions by tracking all ordinary and necessary business expenses including office supplies, software subscriptions, marketing costs, and employee salaries, while maintaining detailed records in accounting software to claim every eligible deduction.

• Recognize that additional tax obligations beyond income tax may apply to your LLC, including payroll taxes when you have employees, sales tax on taxable goods and services, and property taxes on business real estate and equipment depending on your location and business activities.

The basics of LLC taxation

LLC tax classification determines which forms you file and how you pay taxes. The Internal Revenue Service (IRS) automatically classifies single-member LLCs as sole proprietorships and multi-member LLCs as partnerships.

You can change this default classification by filing specific forms with the IRS. Preparing tax returns can be complicated, with filing requirements depending on a variety of factors. Getting help from a tax professional ensures you choose the right approach for your business.

There are two default LLC tax classifications:

• Single-member LLC: Treated as sole proprietorship
• Multi-member LLC: Treated as partnership

And there are two election options to change classification:

• Form 8832:Elect C-Corporation treatment
• Form 2553: Elect S-Corporation treatment

Each classification requires different tax forms and has distinct advantages.

LLC tax obligations include:

• Federal income tax: Reported on personal returns or separate business returns
• State income taxes: Varies by state location and tax elections
• Local income taxes: Depends on city and county requirements
• Sales tax: Required when selling taxable goods or services
• Payroll taxes: Mandatory when employing staff

Pass-through taxation is the primary LLC tax benefit. This means the LLC itself pays no federal income tax. Instead, profits and losses pass directly to members' personal tax returns, avoiding the double taxation that corporations face.

LLC tax benefits and advantages

Choosing an LLC structure offers several tax advantages. You can often have business results flow through to your personal tax return and also choose how the IRS taxes your LLC as your business grows.

An LLC also gives you the flexibility to choose how you're taxed. You can stick with the default classification or elect to be taxed as an S corp or C corp. This lets you pick the most favorable option for your business as it grows.

Filing income taxes for a single-member LLC

A single-member LLC is classified as a disregarded entity by the IRS.

Disregarded entity status means the IRS treats your LLC as part of your personal tax situation. You report business income and expenses on Schedule C attached to your Form 1040.

Exception: Real estate rental income goes on Schedule E instead of Schedule C.

Filing income taxes for a multi-member LLC taxed as a partnership

Multi-member LLC partnership filing requires three steps:

1. LLC files Form 1065: This informational return reports all business income and expenses but the LLC pays no tax
2. Members receive Schedule K-1: This form shows each member's share of profits, losses, and deductions
3. Members file personal returns: Report Schedule K-1 information on individual Form 1040

Filing income taxes for a C corporation

C-Corporation election subjects your LLC to corporate taxation instead of pass-through treatment.

Filing process:

1. File Form 8832 to elect corporate tax treatment
2. File Form 1120 annually with 21% corporate tax rate
3. Receive Form 1099-DIV for any dividends distributed to members

Filing income taxes for an S Corporation

S-Corporation election combines pass-through taxation with potential payroll tax savings.

Filing requirements:

1. File Form 2553 to elect S-Corporation status
2. File Form 1120S annually (informational return only)
3. Issue Schedule K-1 to all members showing their profit/loss share
4. Members report K-1 data on personal Form 1040 returns

Ways to reduce LLC taxes

One of the best parts of running a business is finding ways to lower your tax bill. As an LLC owner, you can deduct ordinary and necessary business expenses. This includes costs like office supplies, software subscriptions, marketing, and employee salaries.

You can also deduct startup costs and take advantage of depreciation for larger purchases like equipment or vehicles. Keeping detailed records of your expenses in accounting software makes it easy to claim every deduction you're entitled to at tax time.

Other taxes for LLCs

Additional LLC tax obligations beyond income tax depend on your business activities and location.

Common LLC taxes include:

• Payroll taxes: Required when you have employees
• Sales tax: Applied to taxable goods and services sold
• Property tax: Levied on business real estate and equipment

Payroll taxes

Payroll taxes apply when your LLC has employees and include both federal and state obligations.

Federal payroll taxes include:

• Social Security: 6.2% each from employer and employee (12.4% total)
• Medicare: 1.45% each from employer and employee (2.9% total)
• Federal income tax: Withheld from employee wages
• Federal unemployment tax: 6% paid entirely by employer

For state and local taxes, it depends on where you are located. Check with your local authorities.

The various taxes have different remittance schedules and deadlines. You need to pay them on time and keep to the schedule, as there are penalties for late payments. A lot of small businesses use payroll software to assist with the calculations and keeping up-to-date.

Property tax

Property taxes vary from state to state, as well as by city and county. They include tax on real estate that a business owns or uses. Some states tax tangible assets, such as cars and equipment; some tax intangible assets, such as copyrights and intellectual property.

Sales tax

Most states have sales tax, which you may be required to collect. You may need to apply for a sales tax license or permit. Some local counties and cities also charge a sales tax.

Manage your LLC taxes with confidence

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FAQs on LLC taxes

Here are answers to some common questions about filing taxes for your LLC.

How much money does an LLC have to make to file taxes?

Generally, your LLC must file a tax return every year, even if it had no income or operated at a loss. The specific form you file depends on your tax classification, but the requirement to file exists regardless of profitability.

What happens if my LLC loses money – do I still need to file taxes?

Yes, you still need to file a tax return for your LLC even if it experienced a loss for the year. Reporting a loss is important because you may be able to deduct it from other income on your personal tax return, which could lower your overall tax bill.

Can I deduct business losses from my LLC on my personal tax return?

In most cases, yes. Because LLCs are typically pass-through entities, business losses are passed to the owners. You can often deduct these losses on your personal tax return, subject to certain IRS limitations. It's a good idea to consult a tax professional to understand how these rules apply to you.

Do I need an EIN to file taxes for my LLC?

You'll need an Employer Identification Number (EIN) if your LLC has employees, files certain excise tax returns, or is taxed as a corporation or partnership. Single-member LLCs with no employees who stick with the default tax classification may not need one, but getting an EIN is often useful for opening a business bank account.

What's the difference between LLC taxes and sole proprietorship taxes?

For tax purposes, the IRS treats a single-member LLC the same as a sole proprietorship by default. Both report business income and expenses on Schedule C of the owner's personal tax return. The main difference is legal: an LLC provides liability protection that a sole proprietorship does not.