Enter a salary you'd pay yourself if you were an employee. This is subject to self-employment/payroll taxes.
Estimated Tax Liability
$0.00
Understanding LLC Taxation
A Limited Liability Company (LLC) offers a flexible business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. How an LLC is taxed depends primarily on how it's structured and what elections it makes with the IRS.
Default Taxing Rules:
Single-Member LLC (SMLLC): By default, the IRS treats an SMLLC as a "disregarded entity." This means the business's income and expenses are reported on the owner's personal tax return (Schedule C of Form 1040). The LLC itself doesn't pay federal income tax.
Multi-Member LLC: By default, a multi-member LLC is taxed as a partnership. The LLC files an informational return (Form 1065), and each partner receives a Schedule K-1 detailing their share of the LLC's income, deductions, and credits. This income then passes through to the partners' personal tax returns (Form 1040).
LLC Tax Elections:
An LLC can elect to be taxed as a corporation by filing specific forms with the IRS:
S-Corporation Election (Form 2553): An LLC can elect to be taxed as an S-Corp. In this structure, the owner takes a "reasonable salary" as an employee, subject to payroll taxes (Social Security and Medicare). Any remaining profit can be distributed as dividends, which are not subject to self-employment taxes. This can potentially lead to tax savings on self-employment taxes.
C-Corporation Election (Form 8832): An LLC can elect to be taxed as a C-Corp. This means the LLC is taxed as a separate entity (corporate income tax rates apply). Profits distributed to owners as dividends are then taxed again at the individual level (double taxation). This is less common for small businesses seeking pass-through benefits.
Key Tax Considerations:
Self-Employment Tax: For disregarded entities and partnerships, owners typically pay self-employment tax (Social Security and Medicare) on their share of the net earnings from the business. This is approximately 15.3% on the first ~$160,200 (for 2023) and 2.9% on income above that threshold. For S-Corp elections, only the "reasonable salary" is subject to payroll taxes.
Ordinary Income Tax: All business income passed through to owners (unless retained by a C-corp) is subject to their individual income tax rates based on their total taxable income.
Reasonable Salary (S-Corp/C-Corp): When electing S-Corp or C-Corp status, owners who work for the business must pay themselves a "reasonable salary." This salary is subject to payroll taxes. The IRS defines "reasonable" based on factors like industry standards, duties performed, and compensation paid to similarly qualified employees.
State Taxes: This calculator focuses on federal taxes. State income tax and franchise tax rules vary significantly by state and should be considered separately.
How This Calculator Works (Simplified):
This calculator provides an *estimate*. The actual tax liability can be influenced by numerous factors not included here, such as deductions, credits, state taxes, and specific IRS rules.
Disregarded Entity/Partnership: It estimates the self-employment tax on the LLC's profit and then estimates the ordinary income tax on the total combined income (owner's personal income + LLC profit).
S-Corp Election: It assumes the "reasonable salary" is paid out and is subject to payroll taxes. The remaining profit is treated as a distribution not subject to self-employment tax. The ordinary income tax is calculated on the total income (owner's personal income + salary + distribution).
C-Corp Election: This is the most complex and is simplified here. It estimates corporate tax on the LLC profit and then assumes the remaining profit is distributed as dividends, taxed at individual dividend rates. This is a highly simplified model due to variable corporate tax rates and the complexities of dividend taxation.
Disclaimer: This calculator is for estimation purposes only and does not constitute financial or tax advice. Tax laws are complex and subject to change. Consult with a qualified tax professional or CPA for personalized advice regarding your specific situation.
var federalIncomeTaxBrackets = [
{ limit: 11000, rate: 0.10 },
{ limit: 44725, rate: 0.12 },
{ limit: 95375, rate: 0.22 },
{ limit: 182100, rate: 0.24 },
{ limit: 231250, rate: 0.32 },
{ limit: 578125, rate: 0.35 },
{ limit: Infinity, rate: 0.37 }
];
var selfEmploymentTaxRate = 0.153; // 12.4% SS up to limit, 2.9% Medicare on all
var ssLimit = 168600; // 2024 Social Security wage base
function calculateIncomeTax(taxableIncome) {
var tax = 0;
var remainingIncome = taxableIncome;
var previousLimit = 0;
for (var i = 0; i < federalIncomeTaxBrackets.length; i++) {
var bracket = federalIncomeTaxBrackets[i];
var bracketAmount = bracket.limit – previousLimit;
if (remainingIncome 0) {
selfEmploymentTax = taxableSEIncome * (selfEmploymentTaxRate); // Split between SS and Medicare conceptually
// Note: Real SE tax calculation has a split SS and Medicare component, this is a simplified aggregate
}
// Ordinary Income Tax Calculation
var totalTaxableIncome = ownerIncome + llcIncome – (selfEmploymentTax * 0.5); // Half of SE tax is deductible
if (totalTaxableIncome < 0) totalTaxableIncome = 0;
ordinaryIncomeTax = calculateIncomeTax(totalTaxableIncome);
explanation = `LLC profit (${formatCurrency(llcIncome)}) is passed through. `;
explanation += `Estimated Self-Employment Tax: ${formatCurrency(selfEmploymentTax)}. `;
explanation += `Estimated Ordinary Income Tax on total income (${formatCurrency(totalTaxableIncome)}): ${formatCurrency(ordinaryIncomeTax)}.`;
estimatedTax = selfEmploymentTax + ordinaryIncomeTax;
} else if (llcType === "s-corp") {
// Reasonable Salary subject to Payroll Taxes (Simplified – assuming flat rate for calculation)
var payrollTaxRate = 0.153; // Similar to SE tax for simplicity
var salaryTax = reasonableSalary * payrollTaxRate;
// Remaining Profit as Distribution (No SE/Payroll Tax)
var distribution = llcIncome – reasonableSalary;
if (distribution < 0) distribution = 0; // Cannot have negative distribution
// Ordinary Income Tax Calculation
var totalTaxableIncome = ownerIncome + reasonableSalary + distribution – (salaryTax * 0.5); // Deduct half of payroll taxes
if (totalTaxableIncome < 0) totalTaxableIncome = 0;
ordinaryIncomeTax = calculateIncomeTax(totalTaxableIncome);
explanation = `Owner takes a reasonable salary of ${formatCurrency(reasonableSalary)}, subject to payroll taxes (${formatCurrency(salaryTax)}). `;
explanation += `Remaining profit (${formatCurrency(distribution)}) distributed as dividend. `;
explanation += `Estimated Ordinary Income Tax on total income (${formatCurrency(totalTaxableIncome)}): ${formatCurrency(ordinaryIncomeTax)}.`;
estimatedTax = salaryTax + ordinaryIncomeTax;
} else if (llcType === "c-corp") {
// Simplified C-Corp: Flat Corporate Tax Rate (e.g., 21%) + Dividend Tax
// Note: This is a HIGHLY simplified model. Real C-Corp taxation is complex.
var corporateTaxRate = 0.21; // Current federal C-Corp rate
var corporateTax = llcIncome * corporateTaxRate;
var retainedEarnings = llcIncome – corporateTax;
// Assume all retained earnings are distributed as dividends (simplification)
var dividendIncome = retainedEarnings;
var dividendTaxRate = 0.15; // Example qualified dividend tax rate (can vary)
var dividendTax = dividendIncome * dividendTaxRate;
// Ordinary Income Tax on owner's personal income
var totalTaxableIncome = ownerIncome + dividendIncome; // Dividend income is taxed separately usually, but summing for this simplified calc
if (totalTaxableIncome < 0) totalTaxableIncome = 0;
ordinaryIncomeTax = calculateIncomeTax(totalTaxableIncome);
explanation = `LLC taxed as C-Corp. Estimated Corporate Tax (${corporateTaxRate*100}%): ${formatCurrency(corporateTax)}. `;
explanation += `Remaining profit (${formatCurrency(dividendIncome)}) distributed as dividends, subject to dividend tax (${dividendTaxRate*100}%): ${formatCurrency(dividendTax)}. `;
explanation += `Estimated Ordinary Income Tax on owner's personal income (${formatCurrency(ownerIncome)}): ${formatCurrency(ordinaryIncomeTax)}.`;
estimatedTax = corporateTax + dividendTax + ordinaryIncomeTax; // Summing all components for total estimate
}
document.getElementById("taxResult").innerText = formatCurrency(estimatedTax);
document.getElementById("explanation").innerText = explanation;
}
function formatCurrency(amount) {
return "$" + amount.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
}
// Initial check for S-Corp/C-Corp to show salary field
document.addEventListener('DOMContentLoaded', function() {
var llcTypeSelect = document.getElementById('llcType');
var reasonableSalaryDiv = document.getElementById('reasonableSalaryDiv');
if (llcTypeSelect.value === 's-corp' || llcTypeSelect.value === 'c-corp') {
reasonableSalaryDiv.style.display = 'flex';
} else {
reasonableSalaryDiv.style.display = 'none';
}
llcTypeSelect.addEventListener('change', function() {
if (this.value === 's-corp' || this.value === 'c-corp') {
reasonableSalaryDiv.style.display = 'flex';
} else {
reasonableSalaryDiv.style.display = 'none';
}
});
});