LLC taxation confuses a lot of founders because the LLC itself is flexible. Here's the plain version of what you'll actually owe.
Default: pass-through
By default, an LLC doesn't pay federal income tax itself — profit passes through to the owners' personal returns (single-member) or via a partnership return (multi-member).
Self-employment tax
US owners typically pay self-employment tax on their share of profits. Profitable LLCs sometimes elect S-corp treatment to reduce it — talk to a tax pro.
State & other taxes
Many states charge an annual franchise tax or fee. Sales tax, payroll tax, and (for foreign owners) special filings like Form 5472 may also apply.
Frequently asked questions
Does an LLC pay taxes directly?
By default no — it's a pass-through, so profits are taxed on the owners' returns. It can elect corporate taxation if beneficial.
What is the S-corp election?
An LLC can elect to be taxed as an S-corp, which may reduce self-employment tax for profitable businesses (US persons).
Do non-residents pay US tax on an LLC?
It depends on whether the income is US-connected and on tax treaties. Foreign-owned LLCs also have filing duties like Form 5472. Get professional advice.