Starting a small business is usually fueled by excitement, not spreadsheets. For many owners, forming an LLC feels like checking the “official” box and moving on.
Taxes and rules, however, have a way of sneaking back into the picture when you least expect them, especially when regulations shift quietly instead of with big announcements. Over the years, several important LLC-related tax and rule changes have taken effect or begun phasing out, and many owners are still operating as if nothing has changed. That can mean smaller deductions. It can also lead to higher tax bills, or compliance headaches that come as an unpleasant surprise.
These are the sort of surprises a small business owner does not want. A little knowledge can go a long way.
The Big Misunderstanding About How LLCs Are Taxed
One of the most common points of confusion is that an LLC is not taxed the same way for everyone. That hasn’t changed, but the impact of that flexibility has. By default, single-member LLCs are taxed like sole proprietorships. Meanwhile, multi-member LLCs are taxed like partnerships, meaning profits pass through to the owners’ personal tax returns.
LLCs can also choose to be taxed as an S corporation or a C corporation, which can change how income and payroll taxes work. What’s new is that changes in deductions and thresholds make these choices more important than they used to be. If you set your LLC tax structure years ago and never revisited it, now is a smart time to review whether it still fits your income and goals.
Proven and dedicated LLC owners will consistently reevaluate the latest tax laws to ensure they are in compliance. Anything short of following the rule correctly could lead them into hot water with the federal government. That can bring any business, no matter the size, to a screeching halt.
Bonus Depreciation (For Some) Is Here To Stay
Many LLC owners built their expectations around generous deductions that are changing. Bonus depreciation, which allows businesses to immediately deduct some or all of the cost of certain equipment purchases, has been made permanent by recent legislation. But that is only for specific equipment and machinery, also referred to as “qualified property,” purchased after January 19, 2025.
This is a reversal of previous plans that called for a “phase-out” over 20% annually. This change is a blessing to some companies. However, some LLC owners aren’t aware of the change, leading to unnecessary budgeting and planning.
A smart move for owners is to dig into their purchase history and ensure that their depreciation qualifies.
New Reporting Rules That Catch Owners Off Guard
New reporting rules have become a major blind spot for LLC owners, and it’s leading to some wasting their precious time.
As of March 2025, LLCs are not required to report beneficial ownership information, also known as BOI, to the federal government. Previously, they were tasked with identifying who actually owns or controls the business. Now, only foreign entities are subject to BOI reporting—at least for now.
What was once true is not anymore, and knowing about this change could save business owners a ton of energy. However, it’s important to remember that these rules could change again. That’s another reason why business owners need to stay up-to-date.
The One Habit That Helps LLC Owners Stay Ahead
The most important takeaway from all of this is that LLC taxes and regulations are no longer something you can set and forget. Rules change gradually, and rollout takes time. Sometimes, the rollouts are completely reversed, meaning business owners need to pay close attention. Meanwhile, deductions fade away quietly, and reporting obligations expand or contract without much notice.
Owners who schedule regular check-ins, even once or twice a year, are far less likely to be caught off guard. Keeping basic records organized and asking direct questions about what’s changed can make a real difference. Staying curious and proactive is often the simplest way to protect your business and your peace of mind.
Have you ever been surprised by a tax, rule, or filing requirement you didn’t know applied to your LLC? Share your experience in the comments.
You May Also Like…
Is Forming an LLC the Right Move for Your Rental Property?
7 “Boring” Businesses That Make People Quietly Rich
14 Money Warnings Every Small-Business Owner Needs to Hear Right Now
10 Budget-Friendly Ways to Upgrade Your Company Office Space
9 Clever Strategies to Protect Assets From Future Lawsuits
The post LLC Changes Most Small Business Owners Still Haven’t Accounted For appeared first on The Free Financial Advisor.
