Typically LLCs are taxed like partnerships, with pass-through taxation. While multi-member LLCs must file an informational tax return, single member LLCs do not. In both cases, the profits or losses are “passed-through” the business and reported on the owners’ tax returns. Any tax due is then paid by the owners at the individual tax level.
LLCs can also elect to be taxed like corporations, where the profits of the LLC are taxed at the business level. The state income tax treatment of LLC profits and losses may or may not mirror the IRS tax treatment depending on the state.