An LLC by its nature offers some specific advantages over a corporation’s organizational structure, including access to more deductions, since the LLC is not required to be a separate tax entity like a corporation. Instead, it is considered a “pass-through” entity for tax purposes, meaning that LLC owners report business profits and losses on their individual tax returns.
Unless you choose to tax the LLC as a corporation, the IRS treats single-member LLCs as sole proprietorships for tax purposes. This means that the LLC itself does not pay taxes on its own behalf and does not have to file a tax return as such.
Additionally, the IRS treats multi-owned LLCs as partnerships for tax purposes. This means that LLC owners (not the LLC itself) each pay taxes on their share of the LLC’s profits on their personal income tax returns.
The LLC tax rate for Vermont is variable, based on net Vermont taxable income. Vermont’s personal income tax system is made up of five brackets with a top rate of 9.5 percent that takes effect at $357,700. Among states with individual income taxes, Vermont’s top rate ranks fourth highest nationally.