![]() That’s because employers pay another 6.2% for Social Security and 1.45% for Medicare without passing it onto employees. As a result, employees withhold just 6.2% for Social Security and 1.45% for Medicare. The self-employment tax comes to 15.3%, with Social Security representing 12.4% and Medicare tax representing 2.9%.Īs anyone who’s checked their pay stub knows, self-employment taxes are higher than Social Security and Medicare taxes paid by workers who aren’t self-employed. When income from LLCs passes through to owners, they pay tax on it as self-employment income. When an LLC opts for an S corporation tax structure, it typically changes the way the IRS treats that LLC’s income. Minimizing paperwork and overhead: Compared to a regular corporation, an LLC has fewer record-keeping and meeting requirements. ![]() Its income passes straight to the owners as self-employment income, avoiding corporate income tax. Avoiding double taxation: An LLC is basically a pass-through entity.Partnership owners and sole proprietors may be personally liable for all business debts. Typically, liability is no more than the amount each invested in the business. Limiting liability: LLC owners have limited personal liability for debts owed by the business.The LLC business entity has some appealing advantages over its alternatives.
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