An LLC is a separate legal entity, but the IRS doesn’t consider it a separate tax entity. From the IRS viewpoint a single member LLC is called a disregarded entity and is still taxed the same as a sole proprietor, unless you make an election to be taxed as a corporation using form 8832. If you did make the election to be taxes as a C-Corp or S-Corp, you can become an employee of the corporation and pay yourself a reasonable salary, which will be an expense for the corporation. But you will also have to file a corporate income tax return, quarterly payroll tax returns, and make payroll tax deposits via the Electronic Federal Tax Payment System - EFTPS.
Here is some more in depth information on the other payroll tax implications of doing that:
Corporate Tax Overview
However, if you didn't make the tax declaration with the IRS, you will still be taxed as a sole proprietor. Our tax system is “as you go” so you will want to estimate your profit quarterly, and pay based on that estimate. You’re responsible for all of your FICA – Social Security and Medicare – along with income tax on your profit. FICA is going to be 15.3% and your income tax will be based on your overall taxable income bracket.
Determining what to pay and when is crucial to avoid penalties and interest on underpayment of tax. Here is a great resource on how to pay estimated taxes.
When you file your 1040 tax return at the end of the year, if you didn’t make the entity election to be taxed as a corporation, you will file a Schedule C along with your 1040.
Hope this helps!
Cindy
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