If I maintain a business bank account for my LLC in the US, and if I let the money I make from my business remain in the business account (without withdrawing to my personal bank account) and use that money only for business purposes, then do I still have to report that income and is the money left in the business account taxable?

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    You have a correct answer but I think there's a point that needs emphasis. Money in an account is not taxable. What is taxable is income. It doesn't matter if the income sits in an account all year, or you spend it on groceries a week after you get it, or whether you get it in cash versus electronically, or whether or not you ever put it in the bank. – dwizum Mar 16 at 13:31
  • if it's still there at the end of the year it is income and that's that. it makes absolutely no difference if you left it in that account, moved it to another account, moved it back and fore, or whatever. the fact is it is income. once you pay all expenses, the rest is income. – Fattie Aug 13 at 19:06

An LLC is a "flow through" entity. Assuming you are the only member of your LLC, it's also a "disregarded entity".

What that basically means is that the IRS treats the LLC is if it doesn't exist: the assets of the LLC (including its bank account) are treated as owned by you personally, and the income of the LLC is treated as earned by you personally.

And everything else follows from that.

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  • Thanks, in that case, if I have business expenses, do I get taxed for the income before those expenses or after? – c00der Mar 17 at 2:05
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    @c00der It's the same as if you didn't have an LLC. You report self-employment income on schedule C. Many business expenses can be deducted against that income on the schedule C. – David Schwartz Mar 17 at 4:26
  • @c00der the good news is, yes, you pay for stuff FIRST from "the LLC bank account". HOWEVER. It's important to note that - perhaps surprisingly - there is absolutely no tax difference if you have an LLC or are just "self employed". If you are self-employed you "take out expenses first" just the same. (As D.S. explains - I am just emphasizing it.) – Fattie Aug 13 at 19:05
  • US LLC is usually by default flowthrough, but can elect to be treated as C-corp; see money.stackexchange.com/questions/94581/… and irs.gov/businesses/small-businesses-self-employed/… . Then the owner doesn't report and pay tax on retained earnings, but the corporation does. – dave_thompson_085 Aug 14 at 8:22

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