How Your LLC Will Be Taxed
In this guide, you'll learn about the main types of Georgia business tax you'll be responsible for, including sales, self-employment, payroll and federal taxes. Profits from an LLC aren’t taxed at the business level the way they are in C Corporations. Instead, they're as follows:
State Taxes for LLCs
You'll need to pay two main types of tax to the Georgia Department of Revenue: income and sales. You may also need to pay the Georgia Corporate Income Tax if it applies to your LLC.
Georgia Income Tax
As a business owner, you’ll need to pay Georgia income tax on any money you pay to yourself. These earnings flow through to your personal tax return. You’ll be taxed at Georgia's standard rates, and you’ll be able to apply regular allowances and deductions.
Any salaried employees will also need to pay Georgia income tax.
The Georgia income tax rate varies based on several factors. Per the Georgia Department of Revenue: "Georgia Individual Income Tax is based on the taxpayer's federal adjusted gross income, adjustments that are required by Georgia law, and the taxpayers filing requirements."
Consult with your accountant or tax advisor to ensure you pay the proper amount.
Georgia Sales Tax
If you sell physical products or certain services, you may need to collect Georgia sales tax at the point of purchase and then pay it to the Georgia Dept. of Revenue.
The Georgia sales tax rate is 4 percent statewide. Local taxing jurisdictions (counties, with variations depending on the city contained within the county, specifically Atlanta) may also impose sales tax at a rate of up to 4.9 percent for a total maximum combined rate of 8.9 percent.
You’ll typically need to collect Georgia sales tax on:
- Tangible, personal property and goods that you sell like furniture, cars, electronics, appliances, books, raw materials, etc.; and
- Certain services your business may provide.
Most states don’t levy sales tax on goods that are considered necessities, such as food, medications, clothing or gas. Use our sales tax calculator to determine how much you may need to pay. Also check with your accountant and the Department of Revenue to confirm whether your business will be required to collect Georgia sales tax and to ensure you pay the correct amount.
Georgia Use Tax
If you purchase physical products outside the state for use in Georgia, you may need to pay use tax. For example, if you buy furniture for your Georgia business from a company in a state that doesn't have a sales tax, you'll be responsible for paying the GA use tax. It's sometimes also referred to as the Georgia sales and use tax.
The current Georgia use tax rate is 4 percent, and local municipalities may add their own use tax in addition to the state's rate. The Georgia sales and use tax is paid directly to the Georgia Tax Center.
Georgia Tax ID Number
Before you can collect sales tax, you may need to apply for a GA state taxpayer identification number, also referred to as a Georgia Tax ID. You'll do this by submitting a Form CRF-002, which you can only do online via the Georgia Tax Center digital portal.
Check with the Georgia Tax Center to confirm whether you need a Georgia Tax ID.
Georgia Corporate Income Tax
Some states — including Georgia — levy a tax on certain businesses for the right to exist as a legal entity and do business in the state. This is usually called a franchise tax, transaction tax or privilege tax. In Georgia, it's the Corporate Income and Net Worth Tax, most often simply referred to as the Corporate Income Tax or Net Worth Tax.
This tax applies to all corporations. It does not apply to LLCs unless your LLC files as a C Corporation for tax purposes.
Federal Taxes for LLCs
As the owner of an LLC, you must pay self-employment tax and federal income tax, both of which are levied as “pass-through taxation."
Federal taxes can be complicated, so speak to your accountant or professional tax preparer to ensure that your Georgia LLC is paying the correct amount.
Federal Self-Employment Tax
All members or managers who take profits out of the LLC must pay self-employment tax. This tax is administered by the Federal Insurance Contributions Act (FICA) and covers Social Security, Medicare and other benefits. The current self-employment tax rate is 15.3 percent.
You’ll be able to deduct some of your business expenses from your income when calculating how much self-employment tax you owe. Here are some examples of how much self-employment tax you may need to pay, depending on your earnings:
Pay Less Self-Employment Tax by Treating Your LLC as an S Corporation
The Internal Revenue Service allows an LLC to be treated as an S Corporation for tax purposes, provided your business meets certain requirements. This can help you reduce the amount of self-employment tax you pay by allowing you to declare some of your income as salary and other income as distributions or withdrawals.
You do this by filing Form 2553 with the IRS. Incfile can also file the form for you. Use our S Corp Tax Calculator to get an idea of how much money you could save with this election.
Consult with your accountant or tax advisor for more information on reducing your LLC self-employment tax through an S Corporation tax election.
Federal Income Tax
You must also pay regular federal income tax on any earnings you take out of your LLC. The amount of income tax you pay depends on your earnings, current income tax bracket, deductions and filing status.
You only pay federal income tax on profits you take out of the business, less certain deductions and allowances. This includes your tax-free amount, plus business expenses and other deductions for areas such as healthcare and some retirement plans.
Speak to your accountant for more information.
Employee and Employer Taxes
If you pay employees, there are some slightly different tax implications. Speak to your accountant to get clear guidance for your own unique situation.
Employees May Need to File Tax Returns
Regardless of whether you withhold federal and state income tax, your employees may need to file their own tax returns.
Employee Insurance and Other Requirements
You may also need to pay insurance for any employees, such as employee compensation insurance or unemployment tax.
Other Taxes and Duties
Depending on your industry, you may be liable for certain other taxes and duties. For example, if you sell gasoline, you may need to pay a tax on any fuel you sell. Likewise, if you import or export goods, you may need to pay certain duties.
Speak to your accountant about any other taxes or duties you may need to withhold or pay.
Most LLCs must pay estimated taxes throughout the year, depending on the amount of profit and income you expect to make. The most common types of estimated tax are: