Vermont LLC Taxes

An Vermont LLC is taxed at three levels: federal income tax on the profits, Vermont state rules, and payroll or sales taxes that depend on what the business does. Vermont taxes personal income, so LLC owners report their share of profit on a Vermont return in addition to the federal one. Vermont also has an entity-level tax to plan for: Min corporate tax $250.

Federal tax treatment

By default the IRS treats a single-member LLC as a disregarded entity, so profit is reported on Schedule C of the owner's personal return. A multi-member LLC is taxed as a partnership and files Form 1065, with each member receiving a Schedule K-1. Either can elect to be taxed as an S corporation (Form 2553) or a C corporation (Form 8832). See the IRS page on LLCs.

Self-employment tax

Members who work in the business generally pay self-employment tax of 15.3% on net earnings: 12.4% for Social Security up to the annual wage base set by the SSA, and 2.9% for Medicare with no cap, plus an additional 0.9% Medicare tax at higher incomes. An S corporation election can reduce this for profitable businesses, but it requires running payroll and paying yourself a reasonable salary. Our LLC vs S-Corp comparison walks through the trade-off.

Vermont state taxes

Sales tax, payroll tax, and local business taxes sit on top of these. If you sell taxable goods or services, register with the Vermont tax agency for a sales tax permit. If you hire, you will register for state unemployment insurance and withholding.

Estimated tax payments

LLC owners usually have no employer withholding, so they pay federal estimated tax each quarter, and Vermont estimated tax as well. Missing estimates can trigger underpayment penalties, so many owners set aside a percentage of every payment they receive.

Vermont specific notes

Vermont LLCs file an annual report within three months after the close of the fiscal year ($35).

Vermont LLC at a glance

Tax rules and thresholds change, and this page is general information. Confirm details with the Vermont tax agency and a licensed CPA before you file.