What happens to income in an LLC?

In an LLC (Limited Liability Company), the income typically flows through to the owners' individual income tax returns. This is due to the pass-through taxation structure that characterizes many LLCs. Unlike corporations that may be subject to double taxation—where the corporation pays taxes on its profits and shareholders pay taxes on dividends—an LLC allows income to be reported directly on the owners' personal tax returns. This means that the profits or losses of the LLC are passed onto the members (owners), who then report this income on their individual tax returns according to their ownership stakes and any applicable deductions.

This structure can provide tax benefits, such as avoiding double taxation, and allows members to take advantage of certain deductions that might be available at the individual level. In many cases, this approach can lead to a lower overall tax burden compared to other business structures.