LLCs are known for their flexibility, and that extends to their taxes—but with flexibility comes complexity. Whether you’re running a solo side hustle or managing a growing partnership, the way your LLC is taxed can be tailored to fit your business needs. That’s exciting, but it also raises important questions about the LLC tax rate.

Should you stick with the default tax structure, or elect to be taxed as an S-corp? How do deductions and quarterly payments come into play? With the 2025 tax season around the corner, here’s everything you need to know about LLC taxes and how to navigate your options.

How are LLCs taxed? Embrace the flexibility

One of the standout features of an LLC is its adaptable tax structure. The IRS doesn’t treat LLCs as separate taxable entities by default. Instead, taxes flow through to the owners’ personal tax returns. That means that the LLC tax rate can very greatly depending on how you’ve set up your LLC.

Here’s how it can play out:

  • Single-member LLCs are taxed like sole proprietorships. You’ll report your business’s income and expenses on Schedule C of your personal tax return, and the profits are taxed at your individual income tax rate.
  • Multi-member LLCs follow partnership tax rules. Each member reports their portion of the LLC’s income on their personal returns, taxed at their respective rates.
  • LLCs opting for S corporation taxation pay self-employment taxes only on the owner’s salary. Remaining profits, treated as distributions, are taxed at regular income tax rates. Many LLC owners use this setup to reduce their overall tax burden when their business earns enough to make the change worthwhile.
  • LLCs taxed as C corporations pay the corporate tax rate, currently 21%. Profits distributed as dividends are taxed again at the shareholder level, or double taxation.

What is the federal LLC tax rate?

For most LLC owners, federal taxes follow the same brackets as personal income taxes. Here’s an overview of the 2024 brackets (applicable to 2025 filings):

Tax RateSingle FilersMarried Filing Jointly
10%$0 – $11,000$0 – $22,000
12%$11,001 – $44,725$22,001 – $89,450
22%$44,726 – $95,375$89,451 – $190,750
24%$95,376 – $182,100$190,751 – $364,200
32%$182,101 – $231,250$364,201 – $462,500
35%$231,251 – $578,125$462,501 – $693,750
37%$578,126+$693,751+


LLCs taxed as partnerships or sole proprietorships will use these brackets for federal taxes. S-corp owners apply these rates to distributions. Their salary is taxed separately.

Self-employment tax: Don’t forget it

You’re responsible for paying self-employment taxes covering Medicare and Social Security if your LLC is taxed as a partnership or sole proprietorship. The current rate is 15.3%, broken down into:

  • 2.9% for Medicare, applied to all earnings.
  • 12.4% for Social Security, applied to earnings up to $160,200 in 2025.

LLC owners taxed as S corps have a powerful tax-saving trick: split your income into a reasonable salary and distributions. Why? Only your salary gets hit with Social Security and Medicare taxes, while distributions are taxed at standard income rates. For high-earning LLCs, this strategy can unlock massive savings and keep more money fueling your growth.

What is the state-level LLC tax rate?

The tax landscape for LLCs differs significantly depending on the state you’re operating in. While it’s essential to research your specific state’s tax rules, here are a few common scenarios to keep in mind:

  • No state income tax: States like Florida, Tennessee, Texas, and Washington don’t impose state income taxes on LLC earnings. This can be a major advantage for business owners in these locations.
  • State income tax applies: In most states, your LLC’s income is taxed if it passes through to your personal tax return. Tax rates vary widely, ranging from low single digits to over 10%.
  • Franchise taxes or fees: Some states, like California, charge annual franchise taxes or fees, which may be based on your LLC’s income or assessed as a flat rate regardless of revenue.

Other tax implications for LLC owners to consider

Running an LLC comes with additional tax obligations, depending on your business model:

  • Sales tax: If you sell products, you’re typically required to collect and remit sales tax. The rates vary by state (and sometimes by local jurisdictions).
  • Payroll tax: If you have employees, you’ll have to pay payroll taxes that cover Medicare, Social Security, and federal unemployment taxes.
  • Use tax: Some states have use taxes on out-of-state purchases for goods used locally.

How LLCs can minimize their tax burden

Smart planning is a must if you’re managing LLC taxes. Every smart move you make counts. A small adjustment here, a better record there—it can add up to serious savings. Follow these tips to keep more of your hard-earned money where it belongs: in your business.

Choose the right tax election

Electing S-corp status for your LLC could be a game-changer, helping you reduce self-employment taxes and potentially saving you thousands. By designating part of your earnings as salary and the rest as distributions, you lower the portion subject to Social Security and Medicare taxes.

However, this strategy isn’t for everyone. It works best for businesses with consistent profits high enough to justify the additional administrative requirements. Run the numbers carefully to determine if an S-corp election aligns with your financial goals.

Deduct business expenses

Every dollar you spend on your business could translate into a valuable tax deduction. From supplies and software subscriptions to travel costs and professional development, these expenses reduce your taxable income, effectively lowering your tax bill. The key to maximizing these savings is meticulous record-keeping.

Track every purchase and categorize your expenses accurately to ensure you don’t miss any deductions. Use a dedicated business bank account to stay organized. Remember, even small costs—like mileage for business travel or a portion of your home office expenses—can add up significantly over time. By capturing every eligible deduction, you’re not just saving money—you’re investing in your business’s financial health.

Maximize retirement contributions

Contributing to a Solo 401(k) or SEP IRA is one of the smartest financial moves for small business owners and self-employed individuals. Not only are these contributions tax-deductible, reducing your taxable income for the current year, but they also allow you to set aside significant savings for your future. For 2024, Solo 401(k) contributions can reach up to $66,000 (depending on income and age), while SEP IRAs allow you to contribute up to 25% of your net earnings.

By taking advantage of these plans, you’re effectively shrinking your tax bill while building a secure financial future. It’s a strategy that benefits you today and ensures long-term peace of mind, making every dollar contributed an investment in your success.

Track quarterly payments

Paying estimated taxes on time is essential for avoiding costly IRS penalties. The IRS requires quarterly payments from business owners to cover income and self-employment taxes throughout the year. Missing these deadlines or underpaying can result in fines that quickly add up, eating into your hard-earned profits.

To stay compliant, use IRS Form 1040-ES to calculate your estimated taxes accurately. Mark the quarterly due dates—April, June, September, and January—on your calendar, and consider automating payments to stay on track. Proactively managing these payments not only keeps you penalty-free but also ensures a smoother tax season when the annual deadline rolls around.

Why LLC owners need a business bank account

Managing your LLC’s taxes without a dedicated business bank account is both incredibly messy and foolishly risky. You’re running a business, not a hobby, so make sure the way you handle your finances reflects that. Here’s why opening a dedicated business bank account is an absolute must:

  • Expense tracking: When business and personal transactions mingle in one account, chaos takes over. Keeping them separate is a must. Clean records mean no guessing games during tax season.
  • Tax prep: Filing taxes gets a lot harder when your financial trail is a jumble of grocery store runs and client payments. A business account keeps everything organized. That organization saves time—and headaches—when it’s time to report to the IRS.
  • Professionalism: Want to secure a loan or partner with another business? A business account signals legitimacy. It shows banks, investors, and collaborators that you’re serious, established, and ready to grow.

Put simply, your LLC needs a business bank account. It’s not optional—it’s foundational. Whether you’re just starting out or growing, this single move simplifies taxes and protects your LLC status. It sets you up for success, so don’t skip it.

Take control of your finances with North One

Knowing the LLC tax rate is one thing—actually managing your taxes the right way is another. But you’re not in this alone. Pairing smart strategies with a dedicated business bank account simplifies everything. It helps you keep clean records and supports your tax prep. It also adds that necessary layer of professionalism to your business.

North One is the business banking solution that works for you. With features like seamless expense tracking, high-yield interest options, integrations with accounting tools, and much more, North One helps LLC owners stay organized and ahead of tax obligations. Unlike other accounts, it’s made with small business owners in mind—it’s the ideal companion to your LLC’s growth.

Sign up for a business bank account with North One today to discover how the right business bank account can transform the way you manage your LLC’s finances in 2025 and beyond.