LLC yields no profits: are there still taxes to pay?

I don’t need legal advice, etc…, YANAL, etc…, but I do want to know what I’m going to get into. Here’s the situation: I am planning to start a business. During the first year, I intend to lay a lot of foundation, basically finding out info, filing here and there, talking to this guy and that, etc. doing the thing part-time. So, I get my LLC filed with state and Feds, and during the first year I make NO income at all. Will I owe anything tax-wise? Are there any FICA taxes for a company that makes zero income? I know that there is something called a Self Employment Tax, but is it, and other taxes, just on *income *or is there a flat fee tax just for having a business and being an employer? It may be pretty dumb to ask these questions, but I am pretty unlearned in tax junk.

I’m not an accountant, but I write general accounting software, and I have my own small company, so I have a little experience.

Income tax and payroll tax are two completely different things. If you pay any employee a payroll check, including yourself, the company will have to pay its share of the FICA and Medicare taxes. These amount to 7.65% (6.2% FICA plus 1.45% Medicare) of the gross pay amount for any amount up to an annual salary of about $90,000. Above that, you pay only the 1.45% Medicare. This is same amount that the employee pays, so that the net amount to the government is 12.4% of gross wages up to $90k.

There is also Federal Unemployment Insurance, and in many states a State Unemployment Insurance, together which usually only amount to another couple of percent, but is dependant on several factors.

You may also have a mandatory accident insurance in the form of Worker’s Compensation, or whatever they call it your state.

Your state may also have other taxes that the company pays part or all of.

Income tax, on the other hand, you only pay if there is a profit. And all the payroll expenses (gross pay plus company paid taxes and insurance, not the employee paid taxes) come off the net profit just like any business expense, so that helps.

Many partners in LLCs or Sub S corps pay themselves a smaller salary, on which the company pays all payroll taxes and insurances, and then get the rest of their money through non-payroll payments like dividends, leases, etc. These kinds of things have their own tax liability, but usually for the individual, not for the company. How exactly you should do this is something for you and your accountant to decide.

Very basic answer:

Here is a much more complicated explanation:

What RJKUgly said. Whenever you write yourself a paycheck you’ll be paying payroll tax and also matching some of the taxes. If all your money for the year ends up going to payroll tax, you’ve made no profit and thus owe no income tax.

If you have overpaid your payroll taxes, you do not get a payroll tax refund for the company on the amounts you matched, but you do get a tax refund on your personal tax return just like any other job.

Depending on where you form the LLC, you may have annual franchise taxes (e.g. Delaware has an annual franchise tax for LLCs of, IIRC, $200). If you form the LLC in New York (or qualify to do business in New York), you will have to comply with a one-time publication requirement which is not de minimus. If you form the LLC out of your state of residence, you may also be required to pay a service company an annual fee to act as agent for service of process. Other states may have other quirks.

I assume you are going to be the sole member of this LLC. For income tax purposes, a sole member LLC is generally a disregarded entity (i.e. all profits and losses of the LLC are treated as your direct profits and losses). Employment taxes are a different story. If you’re paying employees, you will be required to pay fica taxes and withhold payroll taxes. If you are working for yourself or as a consultant, whether through the LLC or not, you will be generally be required to pay a self-employment tax. Consider it paying your own FICA taxes. I’m simplifying, of course, but hopefully that answers your question.

You’ve all done spledidly!
Thank you very much!