Let's say I am an LLC owner in California, with annual profits equal to $1M USD. The business is an online business that makes B2B software sales nationally, but is based in CA.
My understanding is that LLC's are "pass through" meaning that the owner(s) treat the profits as income, for tax purposes.
My math estimate is:
1) CA LLC Annual Fee: $6000~
2) Federal income tax: 39.6%
3) CA State income tax of: 12.3%
4) CA Self-employment tax of: 15.3% on the first $118,500 ($18,130), then 2.9% of anything above 200,000 ($23,200). Total according to the calculator I cite at the bottom of this post, is actually $54,160, so something in my math for this one was about $13k short.
Post-Tax Income = Net Income - LLC Fee - (Net Income * Federal Tax) - (Net Income * State Tax) - (Calculated CA Self Employment Tax)
Post-Tax Income = 1M - (6000) - (1M * .396) - (1M * .123) - (41330)
Post-Tax Income = 433,670$
(Taxes paid = $566,330, or roughly 56.6% of profits)
Is my math sound?
Sources (in order):