A practical guide to how LLCs are actually taxed federally—disregarded entity, partnership, S-corp, or C-corp—when each classification makes sense, what the S-Corp election saves at $150K of profit, the 75-day Form 2553 deadline, and the six mistakes that most reliably trigger IRS audits.
The OBBBA made the QBI deduction permanent and raised it to 23% in 2026, expanded SALT to $40,000 through 2029, and lifted the estate exemption to $15 million. Here is how small business owners running pass-through entities, S corps, and LLCs should plan around it.
An LLC has no federal tax classification of its own — it borrows the rules of a sole proprietorship, partnership, S corporation, or C corporation. This 2026 guide breaks down every regime, the actual rates that apply, the income thresholds where the S-corp election starts paying off, and the state and self-employment tax layers that determine your real effective LLC tax rate.
There is no single small business tax rate. Federal effective rates typically run 12–24% for pass-throughs and a flat 21% for C corps, with self-employment tax, the QBI deduction, and entity choice each shifting the bill by thousands per year.
A structural breakdown of Title 26—the Internal Revenue Code—covering how the tax code is organized, the 2026 changes most relevant to small businesses (permanent 100% bonus depreciation, a $2.5M Section 179 cap, expanded QBI), and the records you need to defend every deduction you claim.
In March 2025, FinCEN's interim final rule removed roughly 99.8% of U.S. entities from Corporate Transparency Act reporting. Domestic LLCs and corporations no longer file BOI reports, but foreign-registered companies, state-level disclosure laws, and bank due diligence still demand clean beneficial ownership records.
A single member LLC is taxed as a disregarded entity by default but creates the legal separation a sole proprietorship lacks. This guide covers formation steps, the three tax election paths (Schedule C, S-corp via Form 2553, C-corp via Form 8832), and the bookkeeping discipline needed to preserve the liability shield.
A sole proprietor netting $100,000 pays roughly $14,130 in self-employment tax that an S corp owner can legally avoid. This guide explains the break-even math, Form 2553 deadlines, reasonable compensation audit triggers, and the annual compliance costs that decide whether the switch actually saves money.
A plain-English guide to the three tax ID numbers most small business owners meet — EIN, SSN, and ITIN — covering who needs which, how to apply directly with the IRS for free, and the common mistakes that trigger penalties or delays.
Foreign-owned US LLCs face a $25,000 Form 5472 penalty per missed filing, 30% default withholding on US-source income, and tighter 2026 BOI rules. This guide covers the entity choices, forms, treaty benefits, and bookkeeping habits non-resident owners need to stay compliant.
Take control of your finances with our open-source double-entry accounting system. Start your ledger today.
© 2019 - 2026 Beancount.io
