Only limited liability companies that operate an active trade or business and which are treated as sole proprietorships or partnerships for tax accounting purposes get subjected to self-employment tax. In comparison, a limited liability company that is holding passive investments (like real estate) and which is treated as a disregarded entity or as a partnership doesn't subject the LLC members to self-employment taxes. Furthermore, note that a limited liability company that has elected to be treated for tax accounting purposes as an S corporation or a C corporation doesn't subject the LLC members (owners) to self-employment tax.
An S corporation or C corporation will owe equivalent Social Security and Medicare taxes on wages paid to shareholder-employees, however. Self-employment taxes owed by a sole proprietorship LLC or a partnership LLC can be substantial. As a rough approximation, in the case of a single-member limited liability company operating for tax purposes as a sole ... more.
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