LLCs are allowed to choose how they want to be taxed, either as an S corporation or C corporation. These options are not available when you are operating as a sole proprietorship. LLCs don't pay their own taxes directly, the income of the business its passed on to the members of the LLC through pass through taxation. This means that a member is subject to self-employment taxes, but at higher levels of income, the LLC can often pay a lower base tax rate than a C Corporation.