The Business Taxes Payable by Your North Dakota LLC
There are a wide variety of business taxes that your North Dakota LLC will need to pay. These include tax that’s payable to the North Dakota government, like North Dakota sales taxes. You will also need to pay federal, self-employment and possibly payroll tax to the IRS.
If you want help with your taxes, Incfile provides a complete Business Tax Filing service.
How Your North Dakota LLC Will Be Taxed
The profits of a North Dakota LLC are not taxed at the business level like those of C Corporations. Instead, taxes for a North Dakota LLC work as follows:
North Dakota LLC owners pay self-employment tax on business profits.
North Dakota LLC owners pay ND 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 LLCs pay North Dakota 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.
Items 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 North Dakota personal tax returns, and that’s where you will pay those taxes.
Business Taxes Payable to the ND Government
There are two main types of tax that you will pay to the North Dakota Office of State Tax Commissioner: North Dakota state income tax and North Dakota state sales tax.
North Dakota State Tax on Your LLC Earnings
As a North Dakota 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 North Dakota income tax. You will be taxed at the standard rates for North Dakota state taxes, and you will also get to apply regular allowances and deductions.
Any salaried employees will also need to pay personal North Dakota state taxes.
The North Dakota state tax rates are between 1.1 percent and 2.9 percent, depending on income.
North Dakota Sales Taxes
If you sell physical products or certain types of services, you may need to collect sales tax (also known as sales and use tax) and then pay it to the ND Department of Revenue. North Dakota sales tax is collected at the point of purchase. Sales tax rates do vary depending on the region, county or city where you are located.
You will typically need to collect North Dakota sales tax on:
- Tangible, personal property and goods that you sell like furniture, cars, electronics, appliances, books, raw materials, etc.
- Certain services that your North Dakota business might provide
Most states do not levy sales tax on goods that are considered necessities, like food, medications, clothing or gas.
Federal Taxes for Your North Dakota LLC
There are a couple of different federal taxes that every LLC will need to pay, including North Dakota 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 North Dakota 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 North Dakota 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 $20,000, you would pay self-employment tax of $3,060.
- On profits of $50,000, you would pay self-employment tax of $7,650.
- On profits of $70,000, you would pay self-employment tax of $10,710.
- On profits of $90,000, you would pay self-employment tax of $13,770.
Pay Less Self-Employment Tax by Treating Your North Dakota 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.Incfile form 2553 S Corporation tax election for an LLC service
Speak to your accountant for more information on reducing your North Dakota 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 North Dakota 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 North Dakota 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 income 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 North Dakota 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 North Dakota LLCs will need to pay estimated taxes throughout the year, depending on the amount of income and profit you expect to make.
The most common types of estimated taxes are:
- Federal income tax
- Federal self-employment tax
- North Dakota state tax
Most North Dakota LLCs will pay estimated taxes four times a year. Speak to your accountant for more information.
FAQs on North Dakota LLC Business Taxes
Yes. North Dakota does have a sales tax, which may vary among cities and counties. You can find more information above.
Yes. North Dakota does have a general state income tax. You can find more information above.
Yes. In most cases you must pay estimated taxes on your North Dakota tax, federal income tax and self-employment tax. Speak to your accountant for more information.