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Tax Law (Questions About Taxes)/Taxation on the dividends of a LLC in Delaware


Hi John,

My name is Erik Imsen and I have a question regarding taxation of dividends from an LLC.

I am a non US citizen and I own shares in several businesses. I'm contemplating to form an LLC in Delaware to transfer all of my assets and set it up as a holding. I would be the sole member, hence would not be considered as in a partnership.

Since my LLC would not be conducting any business in Delaware, I would not have to pay taxes on income.

The question comes to dividends (or distribution to be accurate).

I cannot seem to find the tax rate that would apply on my earnings. How would that work? If the LLC retains earnings, do I need to pay taxes only on the cash distributed to me?

Thanks for your help!
All best,


Thanks for your question.

The income would be taxed at ordinary income tax rates, which depend on the level of your income.  A single member LLC is taxed as a sole proprietorship unless you elect tax treatment as a corporation.  These rates vary from 10-39.6%.

If taxed as a corporation, the earnings would be subject to corporate rates and you could be subject to the personal holding company penalty tax of 15% if you did not distribute the earning to yourself as dividends.

Hope this helps.

John Stancil, CPA

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John Stancil, CPA


I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at I also offer seminars and consultations to churches and clergy on their tax issues at Also visit my blog, I am listed on Tax Connections at Prepare and file your own taxes at


I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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