Frequently Asked Questions

What are the tax implications for partners in a limited liability corporation in Georgia?

In Georgia, partners in a Limited Liability Corporation (LLC) enjoy certain tax benefits due to the pass-through nature of the entity. Unlike corporations, an LLC is not required to pay income taxes. Instead, the taxes are passed on to the owners of the business. For instance, if an LLC with two equal partners earns a federal taxable income of $1 million, each partner will receive $500,000 in earnings and will be required to pay taxes on this amount on their individual Georgia tax returns. In addition to income tax, the partners must also pay self-employment taxes, which include FICA, Social Security, and Medicare tax, typically at a rate of 15.3 percent of the taxable income. However, as self-employed individuals, they can deduct certain business expenses, reducing their taxable income. It's important to note that partnerships and sole proprietorships in Georgia follow similar tax filing rules. The net income for these businesses should also be claimed by the owners on their personal tax filings.