How an LLC is taxed
A single-member LLC is, by default, a 'disregarded entity' — the IRS taxes it exactly like a sole proprietorship. The business itself pays no separate federal income tax.
Instead the net profit flows to your personal return, where it faces self-employment tax (15.3%) and ordinary federal income tax.
An LLC can elect to be taxed as an S-corp or C-corp instead, which changes the maths — see those calculators.
Self-employment tax is the big one
Because there is no employer, you pay both halves of Social Security and Medicare — 15.3% on 92.35% of profit. Half is deductible against income tax.
On higher profits this is often where an S-corp election starts to save money, by splitting profit into salary and distributions.
What this leaves out
This estimate covers federal self-employment and income tax only. It excludes state tax, the qualified business income (QBI) deduction, credits, and other deductions, which can change the result.
This is a federal estimate using 2025 tax-year figures and the inputs you provide. It does not include state tax, credits, or every deduction. Confirm with the IRS or a tax professional before filing.
Frequently asked questions
How is an LLC taxed?
By default a single-member LLC is taxed like a sole proprietorship: profit passes through to your personal return and faces self-employment tax plus federal income tax. The LLC pays no separate federal tax.
Do LLCs pay self-employment tax?
Yes — by default. The owner pays 15.3% self-employment tax on the business profit, on top of income tax. Electing S-corp status can reduce this.
Is an LLC better than a sole proprietorship for tax?
For federal income tax, a default LLC and a sole proprietorship are taxed identically. The LLC mainly adds liability protection, not a tax difference, unless it elects S-corp or C-corp status.
Does this include state tax?
No. It is federal only. Many states also tax business income or charge an LLC fee or franchise tax.