1. Income Tax:

LLC owners are treated as pass-through entities for federal income tax purposes. This means that the LLC itself does not pay federal income tax. Instead, the LLC’s income is passed through to the owners, who then pay federal income tax on their share of the income.

For LLC owners, income tax is typically paid in the form of self-employment tax. Self-employment tax is a 15.3% tax that is imposed on the net earnings from self-employment.

• Single-member LLC owners report the LLC’s income on their individual income tax return and pay self-employment tax on their share of the LLC’s net earnings from self-employment.

• Multi-member LLC owners report their share of the LLC’s income on their individual income tax returns and pay self-employment tax on their share of the LLC’s net earnings from self-employment.

For example, if a single-member LLC earns $100,000 in a year and has $20,000 in allowable business expenses, the owner’s net earnings from self-employment would be $80,000. The owner would then pay self-employment tax of 15.3% on the $80,000, or $12,240.

Non-U.S. residents who own LLCs in the United States are subject to specific tax rules and regulations.

    • Effectively Connected Income (ECI): If the income generated by the U.S. LLC is considered “Effectively Connected Income” (ECI), the non-U.S. resident owner is generally subject to U.S. federal income tax on that income. ECI typically includes income that arises from the operation of a U.S. trade or business.

      • Withholding Taxes: If a non-resident LLC owner earns ECI, the LLC may be required to withhold U.S. federal income tax on the income at the source. This withholding is typically at a flat rate, but it may vary depending on the specific circumstances and any applicable tax treaty.

 

Time To File Income Tax:

• The deadline for filing federal income tax returns is April 15th of the following year. For example, if you are filing your 2023 federal income tax return, the deadline is April 15, 2024.

• If you are unable to file your federal income tax return by the deadline, you can file an extension. An extension will give you until October 15th to file your return. However, you will still need to pay any estimated taxes that are due by the original deadline.

 2. Sales Tax:

Sales tax is a consumption tax that is imposed on the sale of goods and services. Sales tax is typically added to the price of the goods or services at the point of sale. The retailer then collects the sales tax from the customer and remits it to the government.

Sales tax rates vary from state to state, and even from city to city. In some states, there is no sales tax. The highest sales tax rate in the United States is 10.25% in California.

Some items are exempt from sales tax. For example, groceries, prescription drugs, and clothing are often exempt from sales tax.

How sales tax is calculated:

Sales tax is calculated by multiplying the sales tax rate by the taxable amount. The taxable amount is the total price of the goods or services being purchased, minus any applicable discounts or exemptions.

For example, if the sales tax rate is 5% and you purchase a $100 item, the sales tax would be $5.00.

Sales tax nexus:

Sales tax nexus is a legal term that refers to the connection between a seller and a state. If a seller has nexus in a state, they are required to collect and remit sales tax on sales made to customers in that state.

There are a number of factors that can create nexus, such as having a physical presence in the state, having employees in the state, or making a certain number of sales to customers in the state.

Marketplace Facilitator Laws:

Many states have passed laws that make e-commerce marketplaces, like Amazon and eBay, responsible for collecting and remitting sales tax on behalf of sellers. In such cases, the marketplace handles the calculation, collection, and remittance of sales tax on transactions involving buyers in that state.

Seller’s Responsibility:

Even if the marketplace is collecting sales tax, as an LLC owner, you may still have obligations to monitor your sales tax compliance. This includes understanding the marketplace facilitator laws in different states and ensuring that the marketplace is correctly collecting sales tax on your sales.

 Time To File Sales Tax:

• Sales tax deadlines vary from state to state. You can find the deadline for filing your sales tax return on the state’s website.

• In some states, sales tax is filed on a monthly basis. In other states, sales tax is filed on a quarterly basis.

• If you are unable to file your sales tax return by the deadline, you may be subject to penalties and interest.

 Here are the sales tax rates in some famous states:

California	7.25% to 10.25% (varies by location)
Florida	6%
New York	4% to 8.875% (depending on location)
Texas	6.25%
Washington	6.5%
Wyoming:	4%

3. Franchise tax:

The specific name for this fee can vary from one state to another. Some states may refer to it as an “Annual Report Fee,” “Franchise Tax,” “Annual Statement,” or something similar.

Franchise tax is a state-level business tax that certain LLC owners may be required to pay. It’s important to note that not all states impose franchise taxes, and the rules and rates can vary significantly from one state to another.

Minimum Fee:

• In some states, LLCs may be required to pay a minimum franchise tax or a flat fee regardless of their financial performance or size.

Franchise tax of some famous states:

California	$800 + $0.0003 per dollar of net worth over $1 million
Delaware	$300
Florida	$300 + $0.0009 per dollar of net worth over $1 million
New York	$175 + $0.0065 per dollar of net worth over $1 million
Texas	None
Washington	$60
Wyoming:	None

 

4. Annual Renewal fee:

The fee for renewing or maintaining the registration of an LLC is commonly referred to as the “Annual LLC Renewal Fee” or the “Annual LLC Maintenance Fee.” This fee is paid to the state’s regulatory authority, usually the Secretary of State’s office, to keep the LLC in good standing and to continue its legal existence.

NOTE: In many states, the annual renewal fee and franchise tax are often combined into a single payment that LLC owners need to make to maintain their LLC’s good standing.

Here are annual renewal fee in some famous states:

California	$800
Delaware	$300
Florida	$135
New York	$9
Texas	None
Washington	$60
Wyoming:	$60