I have a small business I opened around July and have net around $30,000. I am trying to get a financial advisor but everyone seems to be on thanksgiving break since last friday. As I understand it the IRS see’s Single member LLC’s as a disregarded entity and everything is taxed as personal income. So do you pay your personal income tax bracket rate, in addition to a small business tax rate?
I have a separate business bank account and have not taken any wages to date, however I am about to. My wife and I will fall in the 12% tax bracket as our joint income will be below $89,000 for the year. I am about to transfer $14k to my personal bank account as wages, but am trying to
I vaguely remember seeing that there is a small business tax of 18% on profits for sole member LLC’s. Does this mean I am taxed at 18%, and then an additional 12% on my wages that I transfer to my personal bank account?
There is no federal small business tax.
There is social security and Medicare taxes on earned income, in addition to income tax. W2 worker or self employed, the income is subject to these taxes. When you are a s2 employee your employer pays half. When you are self employed, you pay both halves. This is effectively 14.4%. Then in addition to that you pay whatever your effective federal and state income tax rates are.
The self employed person pays less tax overall, on a 1.00 of earned income, than the employer and employer together pay on a 1.00 of w2 income.
You will pay the same amount of tax on this income you earned regardless of if you leave it in the business bank account or transfer it to your personal account. It’s all your income, either way.