Georgia LLC Taxes: What Business Owners Should Know

A Limited Liability Company (LLC) is a popular business structure for entrepreneurs in Georgia. Operating an LLC in the state means navigating tax obligations at both the federal and state levels. These responsibilities are determined by the number of owners, known as members, and specific choices made regarding how the business is to be taxed. Understanding this framework is a fundamental part of maintaining a compliant business.

Federal Income Tax Classifications for LLCs

The Internal Revenue Service (IRS) does not have a dedicated tax classification for the LLC structure. Instead, an LLC’s federal tax treatment is determined by default rules based on the number of members or by an elective classification chosen by the owners. This flexibility allows business owners to select a tax structure that best aligns with their financial goals.

The IRS automatically assigns a default tax status to newly formed LLCs. A single-member LLC is, by default, treated as a “disregarded entity.” This means for tax purposes, the IRS ignores the LLC as a separate entity from its owner. The business’s income and deductions are reported directly on the owner’s personal tax return using Schedule C with their Form 1040.

For an LLC with two or more members, the default classification is a partnership. The LLC itself does not pay income tax but must file Form 1065, an informational return. Profits and losses are “passed through” to the members, who each receive a Schedule K-1 detailing their share to report on their personal Form 1040.

A significant consideration for owners of LLCs taxed under the default rules is self-employment tax. Members of both single-member and multi-member LLCs are considered self-employed and are responsible for paying this tax on their share of the LLC’s net earnings. This tax covers Social Security and Medicare contributions. The 15.3% rate is composed of 12.4% for Social Security on earnings up to an annual limit and 2.9% for Medicare with no income limit.

Beyond the default classifications, an LLC can elect to be taxed as an S Corporation by filing Form 2553. This election can offer potential tax savings on self-employment taxes. Owners who provide services to the company must be paid a “reasonable salary,” which is subject to payroll taxes. Any remaining profits can be distributed to the owners as distributions, which are not subject to self-employment tax.

Alternatively, an LLC can file Form 8832 to be taxed as a C Corporation. This choice makes the LLC a separate taxable entity from its owners, subject to the corporate income tax rate. This structure can lead to “double taxation,” which occurs when the corporation pays tax on its profits, and then the owners pay tax again on the dividends they receive from those profits.

Georgia State Income and Net Worth Tax

Georgia’s approach to taxing LLCs aligns with the federal classifications chosen by the business. For LLCs that operate under their federal default status as a disregarded entity or a partnership, or those that have elected S Corporation status, Georgia honors this pass-through treatment. The LLC itself does not pay state income tax. Instead, profits are passed to the members, who report their share of the income on their personal Georgia income tax return, Form 500.

When an LLC elects to be taxed as a C Corporation for federal purposes, its tax treatment changes. The LLC is no longer a pass-through entity at the state level and becomes responsible for filing its own Georgia Corporate Income and Net Worth Tax Return, Form 600. It must also pay the state’s flat 5.39% corporate income tax on its net income.

A unique aspect of Georgia’s corporate tax system is the Net Worth Tax. This tax is levied on corporations with a net worth greater than $100,000. The tax rate is graduated and capped at $5,000 for corporations with a net worth over $22 million. Pass-through entities are not subject to the Net Worth Tax at the entity level.

Key Georgia Transactional and Employment Taxes

Beyond income and net worth taxes, Georgia LLCs may be responsible for several other taxes based on their specific business activities, particularly if they sell goods or have employees. These taxes are transactional and require separate registration and remittance processes.

Sales and Use Tax

If an LLC sells tangible personal property or provides certain taxable services in Georgia, it must register with the state to collect and remit sales tax. This obligation is triggered when a business establishes “nexus” with the state through a physical location, employees, or significant sales volume. The total sales tax rate is a combination of the state rate and any applicable local option sales taxes.

Employer Withholding Tax

LLCs that hire employees must register with the Georgia Department of Revenue for an employer withholding tax account. The business is responsible for withholding Georgia income tax from employee wages, based on the employee’s Form G-4. These withheld funds must be remitted to the state on a periodic basis, such as monthly or quarterly.

State Unemployment Insurance (SUI) Tax

Businesses with employees in Georgia are also required to pay State Unemployment Insurance (SUI) tax. This is an employer-funded tax administered by the Georgia Department of Labor, which requires separate registration. The tax rate for new employers is 2.64%, which can be adjusted in subsequent years based on the company’s history of unemployment claims.

Georgia Tax Registration and Annual Filing Requirements

The primary step for tax compliance is registering the LLC with the Georgia Department of Revenue (DOR) through the Georgia Tax Center (GTC), the state’s online portal. To complete the registration, business owners will need key information, including the LLC’s Federal Employer Identification Number (EIN), legal business name, and address. Through the GTC, an LLC can register for all necessary tax accounts in a single application.

Separate from tax filings, every Georgia LLC must file an annual registration with the Georgia Secretary of State. This filing updates the state’s records with the LLC’s current information, such as its principal office address and registered agent, to ensure it remains in “good standing.” The annual registration must be filed online between January 1 and April 1 each year and is accompanied by a filing fee. Failure to file can result in administrative dissolution.