LLCs & LLPs

No Federal tax is imposed on the business entity. Income and expenses are allocated to members or partners, and each pays tax of 10% to 37% (plus self-employment tax, if applicable) on their share of LLC or LLP profit, whether distributed or not. Losses pass through to members or partners. Restrictions on loss deductibility apply.*

Members or partners are shielded from personal liability for business debts. Only their investment is at risk.

* Owners of business entities, which are not taxed as ā€œCā€ corporations, are eligible for a 20% Qualified Business Income (QBI) deduction. The deduction for QBI may be limited and/or subject to phase-out, depending on the taxable income of the individual, as well as such factors as the type of business, amount of wages paid by the business, and amount of capital assets owned by the business. For income above $326,600, the legislation phases in limits on what otherwise would be an effective marginal rate of not more than 29.6%.