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Are LLC Members Required to Pay Self-Employment Taxes?
According to the IRS, members of limited liability corporations (LLCs) are subject to self-employment taxes. In a nutshell, if you are an LLC member, you must pay self-employment taxes on your share of the profits if any one of the following
- You work more than 501 hours during the LLC’s tax year;
- Your LLC offers professional services in the areas of consulting, health, law, engineering, architecture, accounting, or actuarial science;
- You are allowed to execute contracts for your LLC;
- With the current self-employment tax rate at 15.3 percent, many business owners choose to form an S corporation rather than an LLC. In an S corporation, only shareholders are required to pay self-employment taxes on money paid to them as compensation for services. Also, profits from an S corporation are not taxed.
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