Tax rates for LLCs: Comprehensive guide for 2024

Every type of business entity comes with its own tax implications. For many business owners, limited liability companies (LLCs) offer unique tax benefits compared to alternative corporate entities.

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In this guide, we’ll list the LLC tax rates for 2024 and explain how to calculate LLC tax rates, as well as how to file your tax returns as an LLC to take full advantage of the benefits this business structure provides.

2024 IRS tax rates for LLCs

As taxes for an LLC are passed through to its members, the federal income tax rate effectively becomes the functional tax rate for LLC owners.

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These are marginal tax rates, meaning your income is taxed at different rates as it rises. As such, not all of your income will be taxed the same.

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For example, if you earn $50,000, your income is taxed as follows:

• The first $10,000 is taxed at 10% ($1,000).
• The next $30,000 (from $10,001 to $40,000) is taxed at 15% ($4,500).
• The remaining $10,000 (from $40,001 to $50,000) is taxed at 25% ($2,500).

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Here are the 2024 IRS tax rates for LLCs:

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However, federal income tax isn’t all you need to file for and pay as an LLC owner.  Depending on your LLC’s structure, you may also have to pay:

• State income tax or fees
• Self-employment tax
• Payroll tax
• Sales tax

How do LLC taxes work?

LLC tax rates depend on what type of LLC you have and your personal income tax rate.

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LLCs are classified as pass-through entities for federal income tax purposes by the Internal Revenue Service (IRS), which means that your business tax rate is the same as your personal tax rate. As such, your business income and business expenses pass through to your personal income tax return.

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If you’re the sole owner of your LLC, you’ll be taxed as a sole proprietorship. If your LLC has multiple members, it’ll be taxed as a partnership. In either case, you’ll also probably have to pay self-employment tax on your share of business income.

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As an LLC owner, you can also choose to be taxed as an S corporation, which subjects you to a different set of rules. Here’s a closer look at how each type of LLC is taxed:

Single-member LLC

By default, the IRS considers any single-member LLC a disregarded entity and a sole proprietorship for federal income tax purposes.

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If you own a single-member LLC, you won’t have to file a separate tax return reporting your business expenses or income. Instead, you can simply claim the profits from your LLC on your personal income tax form (Form 1040) via Schedule C.

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Unless your LLC is set up for passive activity like real estate investment, you’ll be classified as self-employed by the IRS. This classification means you’ll also have to pay self-employment taxes on your profits by filing Schedule SE.

Multi-member LLC

Unless specified otherwise, the IRS treats multi-member LLCs as partnerships for tax purposes. Similar to one-member LLCs, this means your business itself doesn’t pay any taxes or file tax returns of its own.

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Instead, a multi-member LLC reports its business income and expenses on a partnership income tax return (Form 1065). Each member of the LLC then pays individual taxes on the share of profits they receive and report on their personal income tax returns.

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Like a single-member LLC, owners of a multi-member LLC also have to pay self-employment taxes on their share of the profit, unless the LLC is set up for passive activity.

LLC taxed as an S corp

LLCs can opt to be treated as an S corp for federal tax purposes by submitting Form 2553 to the IRS. Like standard LLC taxation, an S corp is considered a pass-through entity and doesn't have to pay corporate income tax on its profits. Instead, members are taxed according to the share of the company’s profits they receive and their individual tax bracket. Learn more about S corp tax benefits.

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However, unlike a sole proprietorship or partnership, members of an LLC taxed as an S corp do not have to pay self-employment tax on the profits they receive.

LLC taxed as a C corp

Although uncommon, LLCs can choose to be taxed as a C corp for federal tax purposes by filing Form 8832 with the IRS. The company will then have to pay corporate tax while its members also have to pay individual income tax on their capital gains.

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Because of this double taxation, members of an LLC taxed as a C corp don't have to pay self-employment tax on the share of profits they receive.‍

State income tax on LLCs

Usually, states tax LLCs the same way the IRS does—by passing the taxes on to LLC members. However, some states do require LLCs to file state income tax returns and pay an annual tax or fee.

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One example of this is California, where LLCs that make more than $250,000 a year are subject to state taxes on gross receipts, ranging from $900 to $11,790. California-based LLCs also pay an annual fee, or franchise tax, of $800 that’s not based on income and is due whether the LLC turned a profit or not.

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These additional fees can be avoided by electing to be taxed as a corporation.

Additional taxes paid by LLCs and members

Besides federal and state taxes, LLCs and their members may be subject to additional taxes, including:

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• Self-employment tax: LLC members are considered self-employed by the IRS unless the business is set up for passive activity like real estate investment. As a result, LLC members must file for and pay self-employment taxes (including social security and Medicare taxes) using Schedule SE. The current self-employment tax rate is 15.3% of your net earnings from your LLC.
• Payroll tax: LLCs with employees must collect and pay payroll taxes, including unemployment, social security, and Medicare taxes. As an employer, you’re responsible for paying unemployment taxes every quarter. Both you and your employees share in the payment of Medicare and social security taxes, which are done on a monthly or semiweekly basis.
• Sales tax: An LLC that sells taxable goods or services must collect sales tax from its customers, and pay that tax to the relevant state or local agency. Whether the goods or services you provide are taxable varies according to the state in which your LLC is registered and does business.

Should I pay myself a salary from my LLC?

If your LLC is taxed as a sole proprietorship (single-member) or a partnership (multi-member), you shouldn’t pay yourself a traditional salary. Instead, you take draws from the LLC's profits, which are then reported on your personal tax return. These profits are subject to self-employment taxes, which cover Social Security and Medicare.

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However, if your LLC elects to be taxed as an S corporation, you can be an employee of your LLC and receive a salary. This salary must be reasonable for your work. The benefit here is that your salary is subject to payroll taxes, but any additional profits you take as distributions aren't subject to these payroll taxes, potentially offering a tax advantage.

Calculating your LLC taxes

To determine how much your LLC should save for taxes, start by estimating your annual profit, which is your income minus expenses. Then, consider your federal tax bracket, as LLC profits are taxed on personal returns.

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Additionally, factor in self-employment taxes, typically around 15.3% for Social Security and Medicare. If your state has income tax, include that in your calculations. The IRS requires quarterly estimated tax payments if you owe $1,000 or more annually. To avoid penalties, you can follow the safe harbor rule, paying either 90% of your current tax liability or 100% of the previous year's (110% if your income is over $150,000).

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A common approach is to reserve about 25–30% of your income for taxes, but this varies based on individual circumstances. If you want to avoid the headache, though, consulting with a tax professional is the best way to make sure your taxes are accurate and filed on time.

How to prepare and file taxes as an LLC

Doing taxes as a small business or LLC doesn’t have to be a stressful process. Using smart accounting software and taking advantage of e-filing are just some of the ways you can make your life easier once tax season comes around.

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Here are five simple steps to prepare and file taxes as an LLC.

1. Monitor business spending throughout the tax year

Monitoring and recording business expenses throughout the tax year is crucial to accurately filing taxes as an LLC. Using an automated expense management platform like Ramp gives you instant, easy access to organized business expense records by:

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• Automatically collecting and matching receipts to transactions made on connected corporate cards.
• Eliminating the need for manual data entry and the human error that often accompanies it.
• Instantly sorting business expenses by category, department, and employee.
• Seamlessly integrating with your accounting and tax-filing software to update tax documents on a rolling basis.

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On top of making filing taxes as an LLC a breeze, Ramp supplies unlimited corporate cards so you never have to use your personal card for business again.

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Not only does using a business credit card affect your personal credit and help build business credit, but all business-related fees and expenses are tax-deductible. As a result, using a business credit card could lower your tax bill as an LLC member.

2. Collect your financial records

The biggest mistake most LLC and small business owners make is putting off collecting and organizing financial records until just a few days before the filing deadline. Important documents and information to collect well beforehand include:

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• Your taxpayer identification number
• Business and personal bank account statements
• Personal and business credit card statements
• The tax returns your business filed the previous year
• Your business and personal accounting records

3. Identify the right tax forms to file

The type of LLC you own and how it’s taxed will determine the forms you need to file with the IRS. The required forms for each LLC type are listed below.

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One-member LLC

• Form 1040
• Schedule C
• Schedule SE (conditional)
• Schedule E (conditional)

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Multi-member LLC

• Form 1065
• Form 1040
• Schedule K-1
• Schedule SE (conditional)
• Schedule E (conditional)

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LLC taxed as an S corp

• Form 1120S
• Form 1040
• Schedule E (conditional)

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LLC taxed as a C corp

• Form 1120
• Form 1040
• Form 941

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4. Maximize your tax deductions

LLC and small business tax deductions can reduce your taxable income and save your business money in the long term.

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Common tax write-offs to remember include:

• Business insurance
• Commercial property rent
• Vehicle expenses
• Office supplies and equipment
• Business meals
• Business travel expenses
• Advertising expenses

5. File your tax returns on time

It’s important to file and pay income tax on time. If you don’t, the IRS can impose stiff penalties for every month they’re overdue.

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Depending on the type of LLC you own, your tax returns will have varying due dates. Familiarizing yourself with these deadlines will make sure you either meet them or apply for an extension in time.

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• One-member LLC: April 15
• Multi-member LLCs, LLCs taxed as S corps, and LLCs taxed as C corps: March 15

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Additionally, LLCs with employees may need to file and calculate quarterly taxes to stay on top of employment and unemployment tax payments and avoid penalties for underpaying.

Simplify your taxes with automated expense management

Tracking your business expenses throughout the year makes things simple come tax-time. Ramp’s all-in-one corporate card and expense management platform automates expense tracking in real-time, separating your expenses out according to preset categories.

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Ramp also integrates seamlessly with accounting and tax filing software to update your tax documents for submission on an ongoing basis.

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See how Ramp can help streamline your accounting and tax management.