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LLC Formation and Taxation: Everything you need to know in 2025
A Limited Liability Company (LLC) is one of the most popular business structures due to its flexibility, liability protection, and tax advantages. Whether you’re a single-member LLC or a multi-member LLC, your tax classification and legal obligations can significantly impact your business.
For 2025, LLC owners need to understand the different federal tax classifications, including:
✔️ Disregarded entities (single-member LLCs) – Taxes pass through to the owner’s return.
✔️ Partnership taxation (multi-member LLCs) – Income is distributed among members and reported on their individual tax returns.
✔️ LLC taxed as an S Corporation – Avoids self-employment tax on distributions while maintaining pass-through taxation.
✔️ LLC taxed as a C Corporation – Profits are taxed at the corporate level, with potential double taxation on distributions.
Key Steps to LLC Formation and Taxation
- Choose a business name – It must be unique in your state and include "LLC."
- File Articles of Organization – Officially register your LLC with the state.
- Create an Operating Agreement – Defines ownership, management, and financial structure.
- Obtain an EIN – Required for hiring employees or filing business taxes.
- Comply with annual state requirements – Some states require annual reports or fees.
LLCs & Taxation
LLC owners must understand how self-employment tax applies to business income, particularly for single-member LLCs and multi-member LLCs. Electing S Corporation status can help reduce self-employment tax obligations in some cases.
Why Choose an LLC?
- Limited personal liability for business debts
- Pass-through taxation (unless electing corporate tax status)
- Flexible management structure
- Simplified reporting and compliance
Need guidance on LLC taxation or formation? Aldaris CPA can help you determine the best structure for your business in 2025. Contact us today for expert tax and business consulting.