The Business Taxes Payable by Your Montana LLC
Business taxes are a fact of life, and your MT LLC will need to pay a variety of taxes to both the federal and Montana governments. We’ll cover all the main taxes in Montana, including self-employment, payroll, federal and Montana state tax on interest and dividends.
If you want help with your taxes, Incfile provides a complete Business Tax Filing service.
How Your Montana LLC Will Be Taxed
The profits of a Montana LLC are not taxed at the business level like those of C Corporations. Instead, taxes for a Montana LLC work as follows:
Montana LLC owners pay self-employment tax on business profits
Montana LLC owners pay KS state tax on any profits, less state allowances or deductions
All LLC owners pay federal income tax on any profits less federal allowances or deductions
Some KS LLCs pay Montana sales tax on products
Employers pay payroll tax on any salaries they pay to employees
Employees pay federal, state and payroll tax on their earnings.
tems 1, 2 and 3 are taxed as “pass-through” income for any LLC owners, managers or members who receive profits from the business. Any profits are reported on federal and Montana personal tax returns, and that’s where you will pay those taxes.
State Taxes in Montana
As a Montana business owner, you will need to pay state tax on any money you pay to yourself. These earnings flow through to your personal tax return, which is where you will pay income tax. You will be taxed at the standard rates for Montana state taxes, and you will also get to apply regular allowances and deductions.
Any salaried employees will also need to pay personal state taxes.
The Montana state tax rates are between 1 and 6.9 percent, depending on earnings.
Federal Self-Employment and Income Taxes for Your Montana LLC
There are a couple different federal taxes that every LLC will need to pay, including Montana LLCs. These are self-employment tax and federal income tax, which are taxed as “pass-through” income via your tax return forms.
Federal Self-Employment Tax.
All Montana LLC business members or managers who take profits out of the LLC will need to pay self-employment tax. This tax is also known as FICA, Social Security or Medicare tax. It applies to all the earnings you withdraw from your Montana business. The current self-employment tax rate is 15.3 percent.
You will be able to deduct your business expenses from your income when working out 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:
- On profits of $30,000, you would pay self-employment tax of $4,590.
- On profits of $50,000, you would pay self-employment tax of $7,650.
- On profits of $80,000, you would pay self-employment tax of $12,240.
- On profits of $100,000, you would pay self-employment tax of $15,300.
Pay Less Self-Employment Tax by Treating Your Montana LLC as an S Corporation
The Internal Revenue Service allows LLCs to ask to be treated as an S Corporation for tax purposes. This can help you reduce the amount of self-employment tax that you pay by declaring some of your income as salary and other income as distributions or withdrawals.
You can do this by making an “S Corporation Tax Election” with the IRS using a form known as Form 2553. We can file your Form 2553 with the IRS on your behalf.Incifle Form 2553 S corporation tax election for an LLC service
Speak to your accountant for more information on reducing your Montana 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 Montana LLC. The amount of income tax you pay depends on your earnings, current income tax brackets, deductions and how you file.
You only pay federal income tax on your LLC profits that you take out of the business, less certain deductions and allowances. This includes your tax-free amount, plus LLC 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 for Your Montana LLC
If you pay employees, there are some slightly different tax implications. Speak to your accountant to get clear guidance for your own unique situation.
All employers must collect and withhold payroll tax from their employees when they receive their salaries. You would normally withhold 7.65 percent of the taxable salary that you pay to your employees.
You may also choose to withhold federal income tax on the wages you pay to employees. Speak to your accountant for more information.
Regardless of whether you withhold federal tax, your employees may need to file their own tax returns.
You may also need to pay insurance for any employees, like employee compensation insurance or unemployment tax. There will also be other requirements you have for employees.
Depending on the industry you are in, your Montana LLC 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 you may need to withhold or pay.
Most Montana LLCs will need to pay estimated taxes throughout the year, depending on the amount of income and profit you expect to make.
- Federal income tax
- Federal self-employment tax
- Montana state tax
Most Montana LLCs will pay estimated taxes four times a year. Speak to your accountant for more information.
FAQs on Montana LLC Business Taxes
Yes. Montana does have a sales tax, which may vary among cities and counties. You can find more information above.
Yes. Montana does have a general state income tax. You can find more information above.
Yes. In most cases you must pay estimated taxes on your Montana tax, federal income tax and self-employment tax. Speak to your accountant for more information.