How Are Single-Member LLCs Taxed? Schedule C and Self-Employment Tax Explained

If you own a US LLC by yourself and have not filed any election with the IRS, your company does not file its own income tax return. Its profit lands on your personal return, and you pay two taxes on it.

A single-member LLC is a "disregarded entity" by default. You report the business's income and expenses on Schedule C, attached to your Form 1040, and pay ordinary income tax on the net profit. You also pay self-employment tax of 15.3% on most of that profit, calculated on Schedule SE, because the IRS treats you as self-employed rather than as an employee of your own company.

The LLC is invisible for federal income tax

An LLC is a state law creation. The federal tax code does not have a separate category for it, so the IRS assigns a default classification based on how many owners the LLC has. One owner means the LLC is disregarded, and it is taxed the same way a sole proprietorship is.

Disregarded does not mean the LLC disappears entirely. It still protects your personal assets under state law, it still files state annual reports, and it still needs its own EIN if it has employees or pays certain federal excise taxes. The disregarded status applies to federal income tax only.

This also means there is no separate entity-level income tax bill. The business does not pay corporate tax, and you do not pay a second layer of tax when you take money out. Moving cash from the business account to your personal account is an owner's draw, not salary, and it is not a taxable event on its own.

Schedule C is where the profit is calculated

Schedule C (Profit or Loss From Business) is the form that turns your LLC's activity into a single number: net profit or loss. It goes into your Form 1040 alongside wages, investment income, and anything else you earned that year.

The form works through the business in a fixed order.

Gross receipts. Everything the business earned, including payments reported to you on Forms 1099-NEC and 1099-K and payments that were never reported on any form.

Cost of goods sold. For businesses that sell physical products, the direct cost of inventory sold during the year.

Operating expenses. Advertising, software, contractor payments, rent, insurance, professional fees, travel, and the other ordinary and necessary costs of running the business.

Home office and vehicle. These have their own calculations and records requirements. Both are common audit points when the documentation is thin.

The net profit on Schedule C is what you are taxed on, whether or not you withdrew it. If the LLC earned $90,000 in profit and you left $40,000 in the business account, you still owe tax on $90,000. Owners who take only what they need and assume the rest is untaxed are the ones most often surprised in April.

Self-employment tax is the larger surprise

Employees split Social Security and Medicare tax with their employer, 7.65% each. As the owner of a single-member LLC, you are both sides, so you pay the combined 15.3% yourself.

The 15.3% has two parts.

Social Security (12.4%). Applies only up to the annual wage base, which is $184,500 for 2026. Above that, the Social Security portion stops.

Medicare (2.9%). Applies to all net self-employment earnings with no cap. An additional 0.9% Medicare tax applies to self-employment income above $200,000 for single filers ($250,000 for married couples filing jointly).

The tax is calculated on Schedule SE, and it does not apply to your full Schedule C profit. You first multiply net profit by 92.35%, which approximates the employer-side deduction an employee's wages would get. If your net self-employment earnings come to less than $400 for the year, you owe no self-employment tax at all.

You can then deduct half of your self-employment tax as an adjustment to income on your Form 1040. That deduction lowers your income tax. It does not lower the self-employment tax itself.

A worked example shows how the numbers stack

Assume your single-member LLC reports $90,000 of net profit on Schedule C for 2026, and you have no other income.

Your net self-employment earnings are $90,000 × 92.35%, or $83,115. Self-employment tax is $83,115 × 15.3%, or about $12,717. Half of that, about $6,358, comes off your income as an above-the-line deduction.

Income tax is then calculated on what remains after that deduction, the standard deduction, and the qualified business income deduction described below. The $12,717 of self-employment tax is owed on top of whatever income tax results. For many owners at this profit level, self-employment tax is a larger bill than federal income tax.

The QBI deduction reduces income tax, not self-employment tax

Most single-member LLC owners qualify for the qualified business income (QBI) deduction under Section 199A. It lets you deduct up to 20% of your qualified business income when calculating income tax. The One Big Beautiful Bill Act, signed in July 2025, made the deduction permanent and added a $400 minimum deduction starting in 2026 for owners who materially participate and have at least $1,000 of qualified business income.

Above an annual income threshold, limits based on W-2 wages paid and business property start to apply, and owners of specified service businesses (consulting, law, health, accounting, financial services, and similar fields) can lose the deduction as income rises. Below the threshold, the full 20% generally applies regardless of business type.

The QBI deduction has no effect on self-employment tax. It is calculated after Schedule SE and only reduces taxable income for income tax purposes.

Nobody withholds, so you pay quarterly

Because no employer is withholding tax from your LLC income, the IRS expects you to pay during the year through quarterly estimated taxes using Form 1040-ES. You generally need to make estimated payments if you expect to owe $1,000 or more when you file.

For the 2026 tax year, the four payments are due April 15, 2026, June 15, 2026, September 15, 2026, and January 15, 2027. Each payment covers both income tax and self-employment tax on the profit earned in that period.

You avoid the underpayment penalty if your total payments cover at least 90% of this year's tax or 100% of last year's tax (110% if your prior-year adjusted gross income was above $150,000). The prior-year safe harbor is the simpler target in a year when profit is hard to forecast. Your Form 1040, with Schedule C and Schedule SE attached, is due April 15, 2027.

An S corp election changes how self-employment tax applies

A single-member LLC can elect to be taxed as an S corporation by filing Form 2553. The LLC stays an LLC under state law, but for federal tax purposes it now files Form 1120-S, and you become an employee of your own company.

The change that matters is how employment tax applies. As an S corp owner, you pay yourself a reasonable salary through payroll, and Social Security and Medicare tax apply to that salary. Profit above the salary passes through to you on a Schedule K-1 and is subject to income tax but not self-employment tax.

The trade-off is cost and administration. You need to run payroll, file quarterly payroll returns, file a separate business return, and be able to defend your salary as reasonable for the work you do. At lower profit levels, these costs can outweigh the tax saved. The election makes sense when profit is consistently high enough that the self-employment tax avoided on distributions clearly exceeds the added cost.

Foreign-owned single-member LLCs follow different rules

If the sole owner of the LLC is a foreign person or a foreign company, Schedule C is usually not the filing at all. The LLC must file a pro forma Form 1120 with Form 5472 attached each year, reporting transactions between the LLC and its foreign owner. This applies even if the LLC had no income.

The penalty for failing to file Form 5472 is $25,000 per form, per year. Whether the foreign owner also needs to file a US individual return depends on whether the LLC's income is effectively connected with a US trade or business. A nonresident owner generally does not owe US self-employment tax.

Inkle now works with LLCs

Inkle started with Delaware C-Corps and has expanded to LLCs, including single-member LLCs. Our bookkeepers keep the books that feed your Schedule C, and our tax experts prepare your Form 1040 with Schedule C and Schedule SE, plus Form 5472 and the pro forma 1120 if your LLC has a foreign owner. You get one dedicated bookkeeper, and the same team that knows your numbers handles the filing.

The bottom line

A single-member LLC gives you liability protection without changing how the IRS sees your income. Profit flows to your personal return, and you owe both income tax and roughly 15.3% self-employment tax on it, whether or not you took the money out. The figure to plan around is self-employment tax, because no withholding covers it and the QBI deduction does not reduce it. Quarterly estimated payments keep the April bill predictable, and an S corp election is worth modeling once profit is steady and high. If the LLC has a foreign owner, the filing obligation is Form 5472, not Schedule C, and the penalty for missing it is large.

Frequently asked questions

Does a single-member LLC file its own tax return?

Not for federal income tax, by default. A single-member LLC is a disregarded entity, so its income and expenses are reported on Schedule C of the owner's Form 1040. The exception is a foreign-owned single-member LLC, which must file a pro forma Form 1120 with Form 5472.

What is the self-employment tax rate for a single-member LLC owner?

The rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare. It applies to 92.35% of net profit, and the Social Security portion stops at the $184,500 wage base for 2026. An additional 0.9% Medicare tax applies above $200,000 for single filers.

Do I pay tax on money I leave in the LLC's bank account?

Yes. A single-member LLC owner is taxed on the LLC's net profit for the year, not on what was withdrawn. Owner's draws are not separately taxed, and money left in the business is not tax-deferred.

Can I deduct self-employment tax?

You can deduct half of your self-employment tax as an adjustment to income on Form 1040. This reduces your income tax but does not reduce the self-employment tax owed.

When should a single-member LLC elect S corp status?

When profit is consistently high enough that the self-employment tax saved on distributions above a reasonable salary exceeds the cost of payroll and a separate Form 1120-S. The election is made on Form 2553, and the right answer depends on your profit level, state, and how much salary you can justify.

Does a single-member LLC need an EIN?

Not always for income tax purposes, since the owner can report under their own Social Security number. An EIN is required if the LLC has employees, files certain excise returns, has elected corporate or S corp taxation, or is foreign-owned. Most banks also ask for one to open a business account.