Limited Liability Company (LLC) FAQ
How are LLCs taxed?
7. How are LLCs taxed?
Like sole proprietorships (one-owner businesses) and partnerships, an LLC is not considered a separate entity from its owners for tax purposes. This means that the LLC does not generally pay any income taxes itself; instead, the LLC owners pay taxes on their allocated share of profits (or deduct their share of business losses) on their personal tax returns.
LLC owners can elect to have their LLC taxed like a corporation. This may reduce taxes for LLC owners who need to retain a significant amount of profits in the company. For more on reporting and paying taxes as an LLC owner, see How LLCs Are Taxed.