Do LLCs pay business taxes in Washington state?
In Washington, LLCs are subject to the state business and occupation (B&O) tax. This is a gross receipts tax that is calculated on the income from all of the business activities of the LLC. The good news is that Washington is one of the very few states that does not have a personal income tax or a corporate income tax.
However, the LLC’s members or managers are still responsible for paying self-employment taxes. This is basically Social Security and Medicare taxes, and it’s what you would pay as an individual if you were self-employed. The amount you pay depends on how much money you make from your LLC.
How Do LLCs Pay Taxes in Washington State?
Washington tax rules are different when it comes to traditional tax systems at the state level.
Washington does not have a personal or corporate income tax. This means that LLCs in Washington don’t usually pay taxes directly to the IRS. However, members, business owners or managers who take profits out of the LLC must pay self-employment tax. This is a tax that covers Social Security and Medicare contributions.
Virtually all businesses in Washington are subject to the state business and occupation (B&O) tax. This is a tax on the gross receipts of a business, and it’s calculated based on the type of business activity. There are different rates for different types of businesses, but the average B&O tax rate is about 0.4%.
What Are the Benefits of an LLC?
An LLC, or limited liability company, is a type of business structure that offers some great tax benefits. First of all, most LLCs in Washington don’t pay taxes directly to the IRS. Instead, the profits “pass through” to the individual members, who then report them on their personal income tax returns.
This can be a big advantage if you’re operating your business as a sole proprietor because you’d usually have to pay self-employment tax on that income. But with an LLC, the self-employment tax is only 15.3%, which is a lot lower than the rate for regular employment income.
So if you’re looking for a business structure that offers some tax benefits, an LLC might be a good option for you but it is a wise choice to speak to a tax professional who can guide you in the process not only for state and local taxes but also your federal income tax returns and excise taxes.
Conclusion
Yes, LLCs do have to pay taxes in Washington state. The amount you owe depends on a variety of factors, including your LLC’s income and the size of your company.
If you’re not sure how to file your small business taxes, or if you need help setting up a business entity, navigating sales tax, or understanding the amount of tax due, it’s a good idea to talk to a tax preparer. We can help make sure you’re getting the most out of your tax breaks and that you’re filing correctly.
Our tax preparation services come backed by over 25 years of experience. Whether you need help with taxes or a more complicated resolution matter, join the many individuals and businesses across Washington state that depend on Dreis Accounting Services for their accounting needs.
