An LLC is a business entity, registered in the state in which it does business. If an LLC does business in other states, it must be also be registered in those states as a "foreign entity". Each start requires annual renewals and typically charges an annual fee.
LLCs are state business entities, they are not recognized by the IRS. In fact, the IRS calls them "Disregarded Entities". This explains why single owner LLC taxes are simply an added form to the owners' personal tax returns and filed with personal tax returns. LLC owners are not allowed to receive W-2 employee payroll; instead, their entire net income passes through to their personal tax returns and is charged with 15.3% Self Employment (social security and medicare) tax.
LLCs can change their taxing status with the IRS and can "elect" to be taxed as an S-Corporation. S-Corp net income is not charged any self-employment tax because their owners are required to be on W-2 employee payroll and only pay the 15.3% social security and medicare on their payroll income. S-Corporations file separate annual business tax returns on IRS Form 1120-S, due March 15 of each year.
LLCs have fairly easy accounting compliance requirements and are typically less costly for that reason. However the 15.3% self employment tax quickly becomes a very burdensome amount. We recommend electing s-corp tax status once a business is making over $20,000 in net income.
See also What is an S-Corporation? Why does it lower my taxes?
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