I read this article http://www.watsoncpagroup.com/kb/How-does-an-LLC-or-S-Corps-income-affect-my-taxes_73.html but still can get it. My scenario:
I work for a company full time and earn (let's say) 85k.
On a side I want to open LLC in PA to work on my side projects during my free time. Let's say I will earn 1k while doing work for my LLC.
If I register as Single-member LLCs taxes as sole proprietorships. Also there is an option to elect S-Corp. (not sure if it is better for my situation.)
Before LLC all I have to pay is Income Tax on 85k ~ 25%.
With LLC now, there will be additional Self-employee tax ~ 15.3%. So my total tax will be whooping 40.3%. The thing I don't get is will this tax be applied only to earnings from LLC - 1k or total income which is 86k ?