For federal income-tax purposes, the default classification for a single-member Limited Liability Company (LLC) is that of a “disregarded entity.” The term can sound counter-intuitive—your business is still a separate legal entity under state law, yet the IRS “disregards” it when determining who reports and pays the tax. Instead, all income, deductions, credits, and payments flow straight through to the owner’s individual return, making this the simplest and most common tax arrangement for single-member LLCs.
What “Disregarded” Really Means
Single layer of federal taxation. The LLC itself does not file a federal income-tax return (unless it has excise-tax or employment-tax obligations). Everything passes to the owner’s Form 1040.
Separate EIN. A single-member LLC may use the owner’s Social Security Number for federal taxes, yet many owners request an Employer Identification Number (EIN) to open bank accounts, hire employees, or shield the SSN from public disclosures. Businesses formed with Dappr will always receive their own EIN for this purpose.
State-law entity, federal tax proxy. You preserve liability protection and operational flexibility afforded by the LLC statute in your formation state, even though the IRS ignores the entity for income-tax purposes.
How Income Is Reported
Trade or business activity → Schedule C (Profit or Loss From Business).
Rental real estate → Schedule E, Part I.
Farming → Schedule F.
Capital gains, interest, dividends → the usual individual schedules (D, B, etc.).
Because the business is not filing its own return, maintaining clean, transaction-level records is essential. With Dappr Accounting you can keep books yourself, or upgrade to the Business accountant subscription (starting at $890 per year or $89 per month) and have our bookkeeping team deliver tax-ready financials for you. To sign up for Dappr's business accountant service, navigate to Accounting > Hire a bookkeeper (only available with Essentials and Pro subscriptions).
Self-Employment Tax and Estimated Payments
Net earnings from a disregarded-entity LLC are subject to self-employment (SE) tax—essentially the owner’s share of Social Security and Medicare contributions—unless the activity is specifically excluded (e.g., rental income treated as passive). SE tax is computed on Schedule SE and added to the owner’s Form 1040 liability.
Because tax is not withheld the way it is from wages, most owners must make quarterly estimated payments to avoid underpayment penalties. The IRS due dates are traditionally:
Quarter | Income period | Estimated-tax due date* |
Q1 | Jan 1 – Mar 31 | April 15 |
Q2 | Apr 1 – May 31 | June 15 |
Q3 | Jun 1 – Aug 31 | September 15 |
Q4 | Sep 1 – Dec 31 | January 15 (following year) |
*If a due date falls on a weekend or federal holiday, it shifts to the next business day.
Many owners also choose the “safe-harbor” approach—remitting 100 percent of last year’s total tax (110 percent if last year’s AGI exceeded $150,000)—which can eliminate most underpayment penalties even when the current year’s income grows.
Annual Filing Deadline & Dappr’s Return Service
Because the LLC itself does not file a separate federal return, everything ultimately lands on the owner’s Form 1040, normally due April 15. (When April 15 is a weekend or Emancipation Day in Washington, DC, the deadline moves to the next business day.)
Dappr’s federal and state income-tax filing service opens the day after your fiscal year ends—January 1 for most businesses using Dappr. When you are ready, simply navigate to Accounting > Taxes in the desktop app and follow the prompts. The system will pull in your books automatically, generate the required schedules, and let you start your filing in a few clicks.
State-Level Nuances
While the IRS disregards the entity, some states do not. California, for instance, assesses an annual LLC franchise tax even on single-member LLCs, while Tennessee requires an excise-tax return. Other states follow the federal treatment completely. These variations will be explored in separate, state-specific articles, but owners should check for:
State franchise or entity-level taxes.
Annual report fees.
Separate withholding or composite-return rules for non-resident owners.
Electing a Different Tax Classification
If a single-member LLC wants to be taxed as a corporation for strategic reasons—perhaps to reduce self-employment tax or prepare for outside investment—the owner can file Form 8832 (C-corp) or Form 2553 (S-corp). The entity remains an LLC in legal form but is no longer a disregarded entity for federal income-tax purposes. Elections are binding until formally revoked or superseded. Dappr can handle these filings for you. Navigate to Business records > Legal > Legal services to place an order.
Recordkeeping Best Practices
Good books are your first line of defense in an audit and your best tool for maximizing deductions:
Separate business and personal bank accounts by using your Dappr Financial Account.
Track mileage, home-office expenses, and depreciation schedules contemporaneously.
Reconcile monthly to catch errors early.
Dappr Accounting automates bank feeds and expense categorization, and the Business accountant team can perform monthly closes so everything lines up with Schedule C out of the gate.
Conclusion
Operating as a single-member LLC taxed as a disregarded entity keeps federal income-tax compliance straightforward: the business does not file its own return, but the owner must stay on top of Schedule C reporting, self-employment tax, and quarterly estimates. Clear records, timely payments, and awareness of state-level quirks preserve the liability protection of the LLC while avoiding unwanted tax surprises. When tax season arrives, Dappr’s integrated return-filing service—available from Accounting > Taxes—can handle the heavy lifting for you.
Disclaimer: This article is for educational purposes only and is not tax, legal, or accounting advice. Circumstances vary, so consider consulting a qualified tax professional or engaging Dappr’s CPA team ([email protected] or chat with us online) before acting on any information here.