LLC tax rates: Comprehensive guide for 2025

If you’re a small business owner or entrepreneur with a limited liability company (LLC), you have to understand your tax rate. The tax rate for LLCs depends on their structure, income level, and state of registration. This guide explains how LLCs are taxed at both the federal and state levels, outlines the self-employment tax burden, and provides actionable tips to minimize your LLC’s tax liability.

What is an LLC, and how are LLCs taxed?

An LLC combines the personal liability protection of a corporation with the flexible taxation of a sole proprietorship or partnership. As an LLC owner, you benefit from personal asset protection that shields your personal assets from business debts or legal issues.

Your LLC tax burden depends on its structure:

1. Single-member LLC

A single-member LLC is treated as a sole proprietorship for income tax purposes. The LLC does not pay taxes as a separate entity. Instead, the owner reports the LLC’s expenses and business income on their personal income tax return, typically using Schedule C of Form 1040. The LLC’s profits are taxed at the individual’s personal income tax rate, and the owner also pays self-employment tax on the profits.

The self-employment tax rate is 15.3%, covering Social Security (12.4%) and Medicare (2.9%) taxes. For 2025, Social Security tax applies to earnings up to $160,200, and Medicare tax applies to all net earnings, with an additional 0.9% surtax on earnings over $200,000 for individuals.

2. Multi-member LLC

A multi-member LLC is typically taxed as a partnership, meaning the LLC itself does not pay federal income tax. Instead, business profits and losses pass through to the members, who report them on their personal income tax returns.

Each member receives a Schedule K-1, which details their share of the LLC’s income, deductions, and credits. Members are also responsible for paying self-employment tax on their share of the LLC’s net income unless the LLC elects S corp taxation.

3. LLC taxed as an S corp

An LLC can elect to be taxed as an S corp to reduce self-employment taxes. With an S corp, owners must take a reasonable salary, which is subject to payroll taxes. The remaining business profits can be distributed as dividends, which are not subject to self-employment tax.

To qualify for S corp status, the LLC must meet specific IRS requirements, such as having no more than 100 members and only one class of stock.

4. LLC taxed as a C corp

An LLC can opt to be taxed as a C corp by filing Form 8832. This changes the tax treatment, making the LLC subject to the corporate income tax rate, which is currently 21%. This results in double taxation: The LLC pays taxes on profits, and then dividends distributed to owners are taxed again at the individual level.

This structure may offer advantages, such as the ability to reinvest profits at the corporate tax rate, but the double taxation can be a drawback for many small business owners.

2025 federal tax brackets for LLC owners

Because LLC taxes are passed through to its members (unless you elect to be taxed as a C corp), the federal income tax rate effectively becomes the functional tax rate for LLC owners. 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.

Here are the 2025 IRS tax rates for LLCs:

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

State business tax rates for LLCs

State tax obligations vary significantly depending on where your LLC is based. Some states charge state income tax on LLC profits, while others impose franchise taxes or annual LLC fees.

States with high LLC taxes

California

California charges an annual LLC tax of $800. In addition, LLCs earning over $250,000 in gross receipts are required to pay an additional fee based on their income. This fee ranges from $900 to $11,790, depending on the LLC’s gross receipts.

California is known for its complex tax environment, with a state income tax rate that can reach up to 13.3% for high-income earners. As a result, LLCs operating in California may face significant tax burdens, particularly if they generate substantial income.

New York

New York imposes state income tax on LLC profits. The state tax rate varies based on the LLC’s income bracket, and in some cases, the rate can go as high as 10.9% for certain business structures.

LLCs in New York are also required to pay an annual filing fee, which is determined based on the LLC’s gross income. For LLC owners in New York, the state income tax and additional fees make it essential to plan strategically for state-level tax obligations.

States with low or no LLC taxes

Florida

Florida is one of the most popular states for LLC formation because it has no state income tax policy for LLCs. However, businesses in Florida are still subject to an annual franchise tax based on gross receipts. Florida’s tax environment is favorable for LLC owners looking to avoid state income tax, but it's important to factor in the franchise tax when budgeting for operating costs.

Texas

Texas also has no state income tax on LLCs, which can significantly reduce the tax burden for business owners. However, Texas has a gross receipts tax known as the Texas franchise tax, which applies to LLCs that generate income above a certain threshold. The tax is based on the business's gross receipts, not net income.

This means LLCs in Texas may still face tax obligations, even if they’re not earning a profit. The Texas franchise tax is calculated using a marginal rate based on revenue, with a standard rate of 0.375% for most LLCs.

States with mixed or moderate LLC taxes

Delaware

Delaware is famous for its business-friendly environment, including favorable tax laws for LLCs. While Delaware doesn’t impose a state income tax on LLCs that don’t operate within the state, LLCs that conduct business in Delaware are required to pay a franchise tax based on their authorized shares or assumed par value capital.

The annual franchise tax fee is relatively low compared to other states, making Delaware a popular choice for LLC formation, especially for those seeking to raise capital or keep their operations flexible.

Nevada

Like Florida and Texas, Nevada does not impose a state income tax. However, businesses in Nevada must pay an annual business license fee and may be subject to a modified business tax based on gross wages paid to employees. Nevada is known for its corporate-friendly policies, making it an attractive state for entrepreneurs looking to reduce their state tax exposure.

Additional taxes for LLC owners

Beyond income taxes, LLC owners may face other tax obligations, such as the self-employment taxes mentioned above, payroll taxes, and sales taxes.

Payroll taxes

LLCs with employees must pay payroll taxes, including:

• Social Security and Medicare taxes: These are shared by the employer and employee. The current rate for Social Security is 12.4% on wages up to $160,200 (for 2025), and the Medicare rate is 2.9% on all wages. There’s also a 0.9% Medicare surtax on wages over $200,000 for individual taxpayers.
• Unemployment taxes: These fund unemployment benefit programs for workers who lose their jobs. The federal unemployment tax rate is 6% on the first $7,000 of each employee’s wages. However, this tax may be offset by state unemployment taxes, which vary by state.

Employers must also withhold income taxes from their employees' wages and remit these to the IRS. To report and pay these taxes, you will need to use the following forms:

• Form 941: Filed quarterly, this form reports income taxes withheld from employee wages, as well as the Social Security and Medicare taxes paid by both the employer and employee
• Form 940: Filed annually, this form is used to report federal unemployment taxes and must be filed by January 31 of the following year

Sales tax

If your LLC sells taxable goods or services, you must collect and remit sales tax to the appropriate state and local authorities. Sales tax rates vary widely by state, and some states even have local sales tax rates that apply in addition to the state rate. For example, California imposes a 7.25% statewide sales tax, but local jurisdictions can increase this rate, resulting in higher overall sales tax rates in certain areas.

Many states tax physical products, but they may not tax digital goods or services. States like Texas and Florida are known for having broad sales tax provisions that apply to a wide range of goods and services, while states like Delaware don’t have a state sales tax at all.

Another important consideration is sales tax nexus, which refers to a business’s connection to a state that requires it to collect and remit sales tax. This nexus can be established by having a physical presence in the state, such as an office or employees, or by reaching a certain threshold of sales within the state.

For example, California requires businesses to collect sales tax if they have $500,000 or more in sales within the state, even if the business is located outside California.

Once you’ve determined that you need to collect sales tax, you’ll need to:

• Register with the state’s revenue department
• Collect sales tax on all taxable transactions
• Remit the collected sales tax to the state at regular intervals, which can be monthly, quarterly, or annually, depending on sales volume

How to prepare and file taxes as an LLC

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

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 ensure you file accurate taxes as an LLC. Using an automated expense management platform like Ramp gives you instant, easy access to organized business expense records by:

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

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.

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 LLCs make is putting off collecting and organizing financial records until just a few days before the filing deadline. Important documents and information to collect beforehand include:

• 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 proper 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.

Single-member LLC:

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

Multi-member LLC:

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

LLC taxed as an S corp:

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

LLC taxed as a C corp:

• Form 1120
• Form 1040
• Form 941

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. 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.

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.

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

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.

Tax tips and strategies for LLC owners

Take control of tax season with Ramp

Business owners who stay on top of their expenses throughout the year can significantly reduce their tax burden, ensuring they maximize deductions and stay compliant. By using a comprehensive expense management tool, you gain real-time visibility into your spending, making it easier to track deductions, manage business expenses, and prepare for tax season without the last-minute scramble.

Ramp’s expense management automation software allows you to categorize, track, and report your business transactions with ease. With automated receipt matching, intuitive reporting, and seamless integrations, you can confidently navigate tax filing and estimate tax payments. Streamlining your financial operations ensures you’re not only prepared for tax season, but also set for long-term financial success.

Ready to learn more? Try an interactive demo and see why customers who choose Ramp save an average of 5% a year across all spending.