How LLCs Are Taxed: Federal Basics
The IRS does not tax an LLC as its own category. How the LLC is taxed depends on the number of owners and any election you make.
- Single-member LLC: by default treated as a “disregarded entity” and the owner reports income on their own return (generally Schedule C).
- Multi-member LLC: by default taxed as a partnership.
- Election: an LLC can elect to be taxed as a corporation, including an S corporation, by filing the appropriate IRS form (for S corporation status, Form 2553).
Source: IRS, Limited Liability Company (LLC). State taxes, self-employment tax and whether an S corporation election saves money depend on your income and situation; talk to a CPA.
Frequently asked questions
Does an LLC protect me from taxes?
No. An LLC primarily provides limited personal liability protection; income still passes through to the owners by default.
Want someone else to handle the filing?
A formation service files the paperwork for a fee on top of the state fee and often includes a first year of registered agent service. It saves time, but you can file directly with the state for the state fee alone. Compare DIY and services.
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General information, not legal or tax advice. See our methodology and disclosure.