An LLC does not tell you how to take money out — the tax does. Whether you draw profit, run payroll, or elect S-corp status decides how much of your income meets the 15.3% self-employment tax. We map your structure, set a defensible salary, and file the right forms — whether you run the business from Austin or Lisbon.
An LLC is a legal wrapper, not a tax category. The IRS taxes it as one of three things — and that choice, not the LLC itself, drives what you owe.
By default a "disregarded entity" — the IRS ignores it and the profit lands on your Schedule C. There is no salary and no payroll: you take draws, and every dollar of net profit is hit with 15.3% self-employment tax on top of income tax.
Taxed as a partnership on Form 1065. Owners are not employees — they take distributions and guaranteed payments, and each gets a Schedule K-1. Active members generally owe self-employment tax on their share of the profit.
File Form 2553 and the same LLC is taxed as an S corporation. Now you must pay yourself a reasonable W-2 salary; the remaining profit flows out as distributions that escape the 15.3% self-employment tax. This is the lever that can lower the bill.
With an S-corp election the temptation is to pay yourself a tiny salary and take everything else as distributions. The IRS knows this: it can reclassify low wages as salary and bill the back payroll tax with penalties and interest. The salary has to be reasonable for the work you do — we benchmark and document it.
Default single- and multi-member LLCs: active owners owe the full 15.3% self-employment tax on their share of profit. There is no payroll to shield it.
Under an S-corp, the wage you pay yourself carries Social Security and Medicare tax — the same as any employee, split between the company and you.
Profit paid out above a reasonable salary is not subject to self-employment tax. That gap is the entire reason the election can save money.
One owner or several? Active or passive? We map your LLC to its default — disregarded entity or partnership — and the self-employment tax that comes with it before considering any election.
We run the numbers: payroll cost and admin against the self-employment tax saved on distributions. An election only pays once profit clears a threshold, so we show you where you actually sit.
If an S-corp makes sense, we benchmark a defensible wage for your role and industry. Too low invites an IRS reclassification of distributions as wages, plus penalties; we document the basis.
Whether it is a Schedule C, a 1065 with K-1s, or an 1120-S with W-2 and K-1, the same desk that planned the structure prepares and files every form — including your personal 1040.
Each tax treatment comes with its own set of returns. Owners abroad still file every one of these — US tax on LLC income follows you across the border.
Single-member, disregarded. Net profit flows to your personal return and to Schedule SE for self-employment tax.
Multi-member partnership. The LLC files an information return; each owner reports their K-1 share on their 1040.
S-corp election. The LLC files an 1120-S, runs payroll issuing you a W-2 for your salary, and reports the rest on a K-1.