This is the Executive Chairman’s understanding of tax authorities’ rules, specifically for Flamsal Holdings LLC:
Federal Income/Self-Employment Tax (Estimated Quarterly)
Federal Income Tax Rates: 10% to 35% marginal rates
Federal Self-Employment Tax Rate: 15.3% + 0.9%, if applicable
12.4% for Social Security (for earnings in 2024, the wage base is $168,600 for the Social Security portion); 2.9% for Medicare; and an additional 0.9% Medicare if self-employment income (together with that of your spouse if filing a joint return) exceed the threshold amount for your filing status, for example $250,000 if filing as married filing jointly. See IRS Self-Employment Tax (Social Security and Medicare Tax.
Flamsal Holdings LLC, a multi-member limited liability company under the laws of Mississippi, is a pass-through entity who will file Form 1065: Partnership Return of Income for tax purposes. An LLC that is taxed as a partnership pays no federal income tax itself. Instead, it passes its taxable profits and deductible losses through to its members. An LLC taxed as a partnership files a Schedule K-1 for each member, reporting the member’s share of LLC income, deductions, and other items. The member reports these amounts on their personal tax return.
In accordance with the Operating Agreement’s tax distribution clause, the LLC will make quarterly distributions to Members for the coverage of estimated income tax, along with estimated self-employment tax. See IRS Estimated taxes.
For estimated tax purposes, the year is divided in to four payment periods. Each period has a specific payment due date. If you don’t pay enough tax by the due date of each payment period, you may be charged a penalty even if you’re due a refund when you file your income tax return at the end of the year. You may send estimated tax payments with Form 1040-ES by mail, pay online, by phone or from your mobile device using the IRS2Go app.
| Payment Period | Due Date to IRS |
|---|---|
| January 1 – March 31 | April 15 |
| April 1 – May 31 | June 15 |
| June 1 – August 31 | September 15 |
| September 1 – December 31 | January 15 |
Note: If the due date for making an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next day that’s not a Saturday, Sunday, or legal holiday.
A rather sticky issue for LLC members is whether they owe self-employment tax on their share of the company’s earnings. In general, members who are actively engaged in the business must pay this tax.
There is a special rule for LLC members who are the equivalent of Limited Partners and don’t take an active role in the business: They typically don’t pay self-employment tax on profits the company passes through to them, only on compensation they receive for any services they provide to the LLC.
Here’s the rub: The law isn’t clear on how inactive an LLC member has to be to qualify for this special rule. The IRS tried to clear things up a few years ago by proposing rules that would require self-employment tax to be paid on profits distributed to any member who is personally liable for the LLC’s debts, participates in the business for more than 500 hours annually, or has authority to sign contracts on behalf of the company.
Recent case law has provided some direction as to who is and isn’t subject to self-employment tax in an LLC. While it is still not perfectly clear, the IRS’s position is typically that any member that has the authority similar to that of a general partner is subject to self-employment tax on their portion of the business’ earnings.
Mississippi Income Tax (Estimated Quarterly)
The first $10,000 of taxable income is exempt; and the remaining taxable income is taxed at 5%. If married filing jointly, the first $10,000 of each taxpayer’s taxable income is exempt; and each taxpayer’s remaining taxable income is taxed at 5%.
Estimated tax payments to the Mississippi DOR follow the same payment due dates as noted in the table above.
Other Business Taxes
Federal Business Taxes: Various taxes, including excise
Mississippi Sales Tax: 7% remitted monthly, along with any local taxes
Mississippi Business Taxes: Various taxes, including excise
County or City Taxes: Varies based on location
Property Taxes
Employment Taxes
Federal and State Withholding Tax
Federal FICA Tax
Federal and State Unemployment Tax (Employer Only)