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How LLCs are Taxed

The IRS treats LLC the same way as sole proprietorship or partnerships, based on the number of members or owners. Unlike C-Corporations, tax calculation for LLC cover money that was not distributed to the owners or members.



Single-Owner LLC

The IRS treats single-member LLC as sole proprietorship which means LLC do not pay corporate taxes and do not have to file a return. The owners of single-member LLC must report all profits and losses on personal income tax returns with attached Schedule C (Form 1040).


Multi-Owner LLC

The IRS treats multi-owner LLC as partnerships. Like single-member LLC, multi-owner LLC do not pay taxes on business income. Each owner or member of the LLC pay taxes on their portion of profits on their personal income tax returns with attached Schedule E Form 1040.


Even though a multi-owner LLC do not pay corporate taxes on business income Form 1065 filing is still necessary. The IRS evaluates Form 1065 to ensure that LLC owners or members are correctly reporting their personal income taxes. LLC also need to provide each LLC owner or member with a Schedule K-1 (Form 1065), which breaks down each owner or member's portion of the LLC's profits and losses.



See Tax Chart per State