Georgia LLC Taxes
By default, LLCs in Georgia are taxed as “pass-through entities,” meaning the business itself does not pay taxes. Instead, the profits and losses of the LLC are passed on to the members/owners, who pay individual income tax on their earnings. An LLC can also opt to be taxed as a corporation. Georgia has a graduated personal income tax, which ranges from 1% to 5.75%. The corporate income tax in Georgia is 5.75%. Here’s what you need to know about Georgia LLC taxes.
In this article, we’ll cover:
How Are Georgia LLCs Taxed?
Members of Georgia LLCs pay state income tax and the federal self-employment tax of 15.3% (12.4% for social security and 2.9% for Medicare). Single-member LLCs (SMLLC) are taxed as sole proprietors (aka “disregarded entities”) by default, whereas multi-member LLCs are taxed as partnerships. LLCs with default tax classification need to file one of these forms:
- Single-member LLC—Form 1040 (usually Schedule C, but some SMLLCs file C-EZ, E, or F)
- Multi-member LLC—Form 1065
Georgia LLCs taxed as S-corp
Some LLCs can save money on taxes by opting to be taxed as S-corps. Businesses with S-corp tax status are taxed as pass-through entities but can make distributions to shareholders/members that aren’t subject to the 15.3% self-employment tax. Note: In Georgia, S-corps are subject to the 5.75% state corporate income tax, but the tax is paid by the shareholders, not the business itself.
Before you file Form 2553 to apply for S-corp status, it’s a good idea to consult an accountant and make sure S-corp status will actually benefit your LLC. If you decide to be taxed as an S-corp, you’ll file Form 1120-S with the IRS annually.
LLCs taxed as C-corp
LLCs can also file to be taxed as C-corps, the default tax status of corporations. C-corps are subject to “double taxation,” meaning the business pays corporate income tax and the shareholders are also taxed on distributions they receive. However, C-corps are eligible for more tax deductions and credits than default status LLCs. If you’re thinking about applying for C-corp status for your LLC, it’s a good idea to consult a CPA first and learn about the tax implications.
Georgia State Income Tax
Georgia’s individual income tax ranges from 1% to 5.75%, based on income level.
Georgia corporate income tax is 5.75%. Georgia LLCs taxed as corporations with a net worth of over $100,000 need to pay a net worth tax each year. The maximum net worth tax is $5,000 for businesses with a net worth of over $22 million. LLC C-corps file Tax Form 600.
LLCs taxed as partnerships don’t pay corporate income tax, but they do need to report their income by filing Income Tax Return Form 700. Georgia LLC S-corps report their income by filing Tax Form 600S with the Georgia Department of Revenue annually.
Sales and Use Tax
The state sales tax in Georgia is 4%. Local jurisdictions can levy an additional tax, which can bring the total sales tax up to 8% in some counties (8.9% in Atlanta). Georgia has a handy Sales and Use Tax Rate Chart to tell you the sales tax rate in your county. You’ll need to register your LLC with the Georgia Tax Center in order to collect sales and use tax from customers.
Local Georgia Taxes
In addition to local sales tax, some Georgia jurisdictions have other local taxes. For example, Atlanta levies an annual business license tax, based on gross revenue and number of employees. Savannah has a 6% local hotel/motel tax on top of sales tax. Check with your local government office to find out what taxes your LLC needs to pay. Don’t forget that you need to pay local taxes both in the county where your business is located and anywhere else that you do business.
Other Taxes in Georgia
We’re not done just yet. Here are some other Georgia taxes that may affect your LLC.
Georgia State Employer Taxes
Most Georgia LLCs with employees will need to pay for unemployment insurance and workers’ compensation insurance.
- Unemployment Insurance (UI) Tax—Employers with a quarterly payroll of $1500 or at least one worker for 20 weeks of the year need to pay UI tax. The tax rate for new employers is 2.7% until a rate can be calculated based on their claims history.
- Workers’ Compensation—Most employers with 3 or more employees need to purchase workers’ compensation insurance for their employees. The average rate for workers’ comp. in Georgia is around $1 per $100 of covered payroll, but the exact rate will depend on your claims history and the risk involved in your employees’ work.
For certain industries, Georgia imposes additional taxes and fees, including:
- Alcohol and Tobacco License Fees
- Fireworks Excise Tax
- Motor Fuel Tax
- State Hotel-Motel Fee
- Transportation Services Tax
Check out the Georgia Department of Revenue website for more information.
Do foreign LLCs in Georgia need to pay Georgia taxes?
Yes. Georgia foreign LLCs (LLCs formed outside of Georgia) need to pay Georgia taxes if they want to do business in the Peach State. This includes state income tax, sales tax, and any applicable local taxes.