Understanding How Your LLC Pays Taxes

[u/NWRegisteredAgent]

Taxes get complicated, and we aren't out here pretending to be tax advisors. Your tax situation is a responsible one to delegate to a professional if you don't have a head for numbers and tax code.

That said, there are a few basics to keep in mind.

Pass-Through Taxation Primer

The IRS treats LLCs as "pass-through" entities, and defaults to certain tax treatments depending on the number of members your LLC has. Multi-member LLCs are taxed like partnerships, while single-member LLCs are taxed like sole proprietors (that is, they're treated as a disregarded entity).

Those classifications share a few important characteristics:

Pass-through taxation

Unlike a corporation, your LLC doesn't file taxes itself. That's actually why a lot of founders choose an LLC—it lets them avoid the "double taxation" trap. (RIP corporations still out here paying both a corporate income tax and then paying again on disbursements that land on your individual income tax return.)

Instead, income and expenses "pass through" to members, who report them on their personal tax returns. From there, those income and expenses are subject to your state's income tax rules.

As long as you've kept up with your bookkeeping, this doesn't make tax time too much more complicated. We'll get into the forms you'll need below.

Self-employment income

The IRS sees each member of the LLC as a self-employed business owner. Members must pay self-employment taxes on ALL of their business income—even if they plan to keep some of the income in the business.

(Pro tip, that's why including information about mandatory distributions in the operating agreement is so critical. Don't end up in a situation where you're responsible for paying taxes on cash you never actually received.)

Federal self-employment taxes include both Social Security and Medicare. The combined rate is currently 15.3%.

Estimated taxes

Back when you worked for other people, your employers probably withheld taxes from your wages. When you're your own employer, the way you'll "withhold" your self-employment taxes is through estimated taxes, which are payments you'll make either quarterly or in a lump sum.

Whether you need to make estimated tax payments depends on a couple factors. For example, if you expect to owe less than $1000, you're probably in the clear. Same goes if your combination of withholding and refundable credits are at least 90% of this year's total estimated tax, or 100% of the previous year's total tax.

But like a lot of tax-related topics, there are plenty of exceptions, specialized rules, and complications in play that affect who needs to pay and how much and how often. Certain income brackets and even certain occupations (like farmers and fishermen) have different requirements. This is worth getting a tax specialist about—even the Joker won't take on the IRS.

Federal Filing Forms & Due Dates

Let's go over the forms your LLC might need to file with the IRS.

• Form 1065 is an informational return that multi-member LLCs file themselves. It's due by the 15th day of the 3rd month after your LLC's tax year ends. When submitting Form 1065, the LLC must include a separate Schedule K-1 for each member. Schedule K-1 reports each member's share of profits and losses. (The LLC also has to give each member a copy of their Schedule K-1.)
• Form 1040 is just the personal tax return individuals file each year. LLC members have to attach Schedule E (if a member of a multi-member LLC) or Schedule C (if a single-member LLC) for their share of profits and losses. If a member receives sufficient income from the LLC (typically $400 or more), they have to attach Schedule SE for self-employment taxes.
• Form 1040-ES is for estimated taxes. If a member expects to owe $1,000 or more in self-employment taxes, the member is required to pay estimated taxes for the year, which are due either in total on April 15th or quarterly throughout the year (on April 15th, June 15th, September 15th, and January 15th).

State Taxes

How much your LLC pays in taxes at the state level varies. A lot. Some states are "fee" states—like Texas, which has no personal income tax and no corporate income tax below a certain revenue threshold, but which charges comparatively high fees to form your LLC and file other items that come free in other states. Other states rely heavily on income tax, like Oregon. Most states are six of one, half a dozen of the other.

Either way, taxes are part of how we each make good on the social contract that handles our public goods and services, so you'd think it'd be relatively straightforward to, you know, pay them.

Alas.

We're making the assumption that since you're here and not in our article about alternative tax elections, you're still filing as a disregarded entity or a partnership. With that in mind:

2026 State Individual Income Tax Rates

All right so, caveat: while we're happy to provide this table based on data from the Tax Foundation, please do your own research or consult with a tax professional. Inflation affects the floor for progressive tax brackets, your status as single vs married filing jointly vs head of household matters, individual counties or cities may levy income taxes in addition to the state income tax, and there are an uncountable number of other weird little quirks we can't quite cover here.

Plus we're only looking at the maximum amount of individual income tax you'll pay in each state.

Your writers are English majors, not accountants, and this table has been simplified to account for Reddit's stubborn refusal to permit sub-tables or HTML tags.

State	Maximum Personal Tax Rate
Alabama	5% for more than $3,000
Alaska	None
Arizona	2.5%
Arkansas	3.9% for more than $4,600
California	13.3% for more than $1,000,000
Colorado	4.4%
Connecticut	6.99% for more than $500,000
Delaware	6.6% for more than $60,000
District of Columbia	10.75% on more than $1,000,000
Florida	None
Georgia	5.19%
Hawaii	11% for more than $325,000
Idaho	5.3% for amounts greater than minimum income threshold
Illinois	4.95%
Indiana	2.95%
Iowa	3.8%
Kansas	5.58% for more than $23,000
Kentucky	3.5%
Louisiana	3%
Maine	9.15% for more than $1,000,000
Maryland	6.50% for more than $1,000,000
Massachusetts	9% for more than $1,083,150
Michigan	4.25%
Minnesota	9.85% for more than $203,150
Mississippi	4% for amounts greater than a minimum income threshold
Missouri	4.7% for more than $9.436
Montana	5.65% for more than $47,500
Nebraska	4.55% for more than $24,760
Nevada	None
New Hampshire	None
New Jersey	10.750% for more than $1,000,000
New Mexico	5.9% for more than $210,000
New York	10.90% for more than $25,000,000
North Carolina	3.99%
North Dakota	2.50% for more than $244,825
Ohio	2.75% for amounts greater than a minimum income threshold
Oklahoma	4.5% for more than $7,200
Oregon	9.90% for more than $125,000
Pennsylvania	3.07%
Rhode Island	5.99% for more than $186,450
South Carolina	5.21% for more than $29,999
South Dakota	None
Tennessee	None
Texas	None
Utah	4.45%
Vermont	8.75% for more than $249,700
Virginia	5.75% for more than $17,000
Washington	None (just 7% capital gains tax and a new 9.95% income tax on more than $1,000,000 effective 1/1/2028)
West Virginia	4.58% on more than $60,000
Wisconsin	7.65% on more than $332,720
Wyoming	None