I am an LLC. How do I pay taxes?

Hello June,

I am glad I discovered your blog. Already I learned a great deal! Anyway, I am starting an LLC in NY with 2 other members and am a bit concerned about messing up with estimated & self employment taxes. I am the managing member and the other 2 will not participate in management issues. It is a brand new business so how will estimated taxes be calculated?

Also, I understand I am subject to self employment taxes and they should not, but is this done only after profits/losses are distributed? If the business has no net income, does that mean I pay no self-employment taxes?

Thank you for any help you can give, I just want to get this right. Rhonda in the Bronx :)


Hi Rhonda,

I, too, am glad that you discovered my blog!

You say you are an LLC with other people. I assume from that you have formed a partnership. I cannot say it frequently enough so i will take another opportunity here: An LLC [Limited Liability Company] is a legal entity and can be a sole proprietorship, partnership or corporation. More info here LLC? Incorporate?

As a self-employed you -- and your partners -- [I am not sure what you mean by "they should not"] must pay federal and state income tax and self-employment [SE] tax. Depending on your income amount you may also be subject to New York City Unincorporated Business Tax. SE tax is based upon your business net profit. No profit means no SE tax. Income tax is based upon your net profit and all your other income as well. Taxes are explained on my website here Taxes: Which ones and how much do I pay?

You may have to pay estimated taxes. It depends on business and all other income and also how much may be withheld from your spouse's income, or via a pension, etc. How much and when to pay estimated tax is explained in this blog post Estimated Taxes .

Wish you much success!
June