A single-member LLC is a legal shield with no tax personality. Federally, it is "disregarded": the IRS looks straight through it to the owner. For a US resident that means the business lives on Schedule C of the personal return; the LLC files nothing federal of its own. That simplicity is real, and it is also where the surprises hide.
Income tax
Net profit (sales minus deductible expenses) is added to the owner's other income and taxed at ordinary rates after the standard deduction. Most owners also get the 20% qualified business income deduction, which knocks a fifth off the taxable profit, with limits for higher earners in service businesses. Losses offset other income, subject to at-risk and passive rules that rarely bite a working owner.
Self-employment tax: the one people forget
Because no employer is paying Social Security and Medicare for you, you pay both halves: 15.3% on 92.35% of net profit up to the wage base ($184,500 in 2026), 2.9% above it. It applies before any deduction and even when income tax is zero. On $60,000 of profit that is about $8,500, which is why a profitable first year often ends in a tax bill nobody budgeted for. Half of it is deductible for income tax purposes, which softens it slightly.
Quarterly estimates
Nobody withholds tax from business income, so the IRS expects four payments through the year: April 15, June 15, September 15 and January 15. Underpaying costs interest-like penalties from each date. The safe harbour: pay 100% of last year's total tax (110% above $150,000 of income) in equal instalments and no penalty applies whatever this year brings.
The state layer
States do not disregard the LLC. Most charge an annual report fee or franchise tax whether or not the business earns anything: $300 in Delaware, $800 minimum in California, nothing in New Mexico or Arizona. State income tax follows the owner's residence and the source of the income; an LLC formed in a no-tax state does nothing for an owner who lives in a taxing one.
Non-resident owners
A single-member LLC owned by a non-US person is disregarded for income tax but not for reporting: Form 5472 with a pro forma 1120 is due every year, and the owner files Form 1040-NR only if the LLC's activity creates US-connected income. Two different questions, often confused.
When to change the default
The S-corp election starts saving money once profit exceeds a reasonable salary by roughly $50,000, because distributions above salary escape self-employment tax. Below that, the payroll and extra return cost more than they save. A C-corp election makes sense for a business raising investment or retaining profit at the 21% corporate rate, and rarely for anyone else. Both are elections, not new entities.
The check: take last year's net profit, multiply by 0.9235 and then by 0.153. That is roughly the self-employment tax. If it was not in the budget, the estimates were short.