New York Multi-Member LLC Partnership Tax: K-1s, State Returns, and the $9 Filing Fee

Default Tax Classification for Multi-Member NY LLCs

By default, a multi-member LLC (2+ members) is taxed as a **partnership** for federal tax purposes. This means:

- The LLC itself does NOT pay income tax - The LLC files an **information return** (Form 1065) reporting income, deductions, credits - Each member receives a **K-1** showing their share of income/loss - Members report their K-1 on their personal tax return and pay tax individually

This is called "pass-through taxation" — profits pass through to the members, who pay tax at their personal rates. The LLC entity itself pays no federal income tax.

New York follows federal classification for state tax purposes, so a multi-member NY LLC:

- Files **Federal Form 1065** (partnership return) - Files **NY IT-204** (New York Partnership Return) - Pays an **annual New York State LLC Filing Fee** based on gross income - Each NY-resident member pays NY personal income tax on their K-1 share

The New York LLC Filing Fee

This is the tax that trips everyone up. New York charges a per-entity filing fee separate from the Partnership Return — based on your LLC's gross income from NY sources:

| NY-source gross income | LLC Filing Fee | |-----------------------|----------------| | $0 - $100,000 | $25 | | $100,001 - $250,000 | $50 | | $250,001 - $500,000 | $175 | | $500,001 - $1,000,000 | $500 | | $1,000,001 - $5,000,000 | $1,500 | | $5,000,001 - $25,000,000 | $3,000 | | Above $25,000,000 | $4,500 |

The fee is due **March 15** each year (or Sept 15 with extension). Filed separately from Form IT-204 using Form IT-204-LL.

**Not cheap**: a multi-member LLC with $600K revenue owes $500/year just in filing fees, on top of member-level taxes.

Federal Form 1065: What's Reported

Form 1065 reports:

- **Ordinary business income/loss** (box 1 of K-1) - **Interest income** (box 5) - **Dividend income** (box 6) - **Guaranteed payments** to members (box 4) - **Net short-term capital gain/loss** (box 8) - **Net long-term capital gain/loss** (box 9a) - **Other income/loss** - **Depreciation, Section 179 deduction** - **Meals, entertainment, travel expenses** (50% deductible) - **Self-employment earnings/loss** (box 14, critical for SE tax)

The LLC's accountant prepares this by March 15 (with extensions to September 15 available).

K-1 Schedule Details

Each member receives a K-1 showing their distributive share. The K-1 can be intimidating — 20+ boxes of different income types. The most commonly used:

- **Box 1**: Ordinary business income - **Box 14**: Self-employment earnings (subject to SE tax) - **Box 19A**: Cash distributions - **Box L**: Partner's capital account analysis (running tally of contributions + allocated earnings - distributions)

Members report K-1 on their personal Form 1040 via Schedule E (and Schedule SE for self-employment tax if applicable).

NY IT-204: State Partnership Return

Parallel to federal Form 1065. Reports:

- Each member's share of NY-source income - Each member's share of non-NY-source income - NY-specific modifications (state-level add-backs and subtractions) - Total income allocated to NY for apportionment purposes

Non-NY members still file IT-204 if the LLC has NY-source income, but they only pay NY tax on the NY-source portion.

NY Personal Income Tax on K-1 Income

Each NY-resident member pays NY personal income tax on their entire K-1 share. Rates (2026):

- **Under $8,500**: 4.0% - **$8,500 - $11,700**: 4.5% - **$11,700 - $13,900**: 5.25% - **$13,900 - $80,650**: 5.5% (most middle earners) - **$80,650 - $215,400**: 6.0% - **$215,400 - $1,077,550**: 6.85% - **Above $1,077,550**: 10.3%

Plus **New York City** personal income tax (if you live in NYC): up to 3.876% on top.

Plus **Yonkers** tax (if you live in Yonkers): up to 1.47%.

A Manhattan resident earning $300K in K-1 income faces combined federal (32%) + NY (6.85%) + NYC (3.876%) = **42.7% marginal rate** on LLC income. It's among the highest tax burdens in the US.

Self-Employment Tax on K-1 Income

Members who materially participate in the LLC's business owe self-employment tax on their K-1 income. SE tax is 15.3% (Social Security 12.4% + Medicare 2.9%) on the first $168,600 of 2026 SE earnings, and 2.9% Medicare only above that.

**Materially participating members**: doctors in a medical PLLC, partners in a law firm, active members of a consultancy — they actively work in the business.

**Passive members (limited partners)**: investors who don't participate in management typically escape SE tax on their K-1 income. But classification as "limited partner" for SE tax purposes is narrower than many people think.

The LLC's agreement usually addresses material participation status. Work with a CPA to confirm.

Guaranteed Payments

A "guaranteed payment" is money paid to a member regardless of the LLC's profit — essentially a salary for partnership-taxed entities.

Characteristics: - Fixed amount (not dependent on profit) - Deductible to the LLC (reduces ordinary business income) - Taxable to the recipient member as ordinary income (box 4 of K-1) - Subject to self-employment tax - NOT subject to FICA withholding (different from W-2 wages)

Guaranteed payments are useful when one member contributes labor while others contribute capital. The laboring member gets paid for their work via guaranteed payments; profit distributions reflect ownership.

The S-Corp Alternative for High Earners

At higher income levels, NY LLC partners often elect S-Corp treatment to avoid SE tax on distribution portions.

**Trade-off math** for a $300K-earning NY LLC member:

**As partnership (default)**: - $300K K-1 income - SE tax: 15.3% × $168,600 + 2.9% × $131,400 = $29,594 - Federal income tax: ~$65K (at 24% effective) - NY state: ~$16K - NYC: ~$11.6K - **Total tax ~$122K** (40.6% effective)

**As S-Corp with $120K reasonable salary**: - $120K W-2 salary (FICA: $18,360 combined) - $180K distribution (NO SE tax) - Federal income tax on combined: ~$62K - NY state: ~$16K - NYC: ~$11.6K - **Total tax ~$108K** (36% effective)

**S-Corp saves ~$14K** on this $300K earner. Minus $2-3K additional compliance costs = $11K net savings.

But NY quirks make S-Corp less attractive than federal: - NY imposes 6.5% state-level franchise tax on S-Corps (with minimum fees) - NY doesn't automatically recognize federal S-Corp election — must file NY CT-6 separately - NYC imposes 8.85% Unincorporated Business Tax (UBT) for single-member / closely-held businesses earning above thresholds

Talk to a NY-specific CPA before electing S-Corp.

The Non-Resident Member Problem

If some LLC members don't live in NY but the LLC has NY-source income, those non-resident members still owe NY non-resident income tax on their share of NY-source income.

Options:

**1. Composite return**: the LLC files a single "composite return" covering all non-resident members and pays their tax on their behalf. Simpler for the members but the LLC absorbs the cost.

**2. Individual non-resident returns**: each non-resident member files their own NY-IT-203 non-resident return. More work for members but allows them to claim personal deductions and potentially owe less.

**3. Partnership pays the tax**: under NY's elective pass-through entity tax (PTET), the LLC elects to pay NY tax at the entity level. Members get a state tax credit for their share. Can save overall tax if members are in the state SALT cap.

Multi-State Partners

If your LLC has members in multiple states, each state where the LLC "does business" may require:

- State partnership return (or equivalent) - State tax on allocated income - Sometimes a separate LLC filing fee (similar to NY's but in other states)

For a 5-state LLC with members in CA, NY, TX, IL, FL:

- CA state partnership return (member: CA resident pays CA tax on entire share + $800 franchise tax + LLC fee) - NY IT-204 (member: NY resident pays NY tax on full share + $9 filing fee per member) - TX has no state income tax, but franchise tax if revenue >$2.47M - IL IL-1065 (member: IL resident pays 4.95% on their share) - FL has no state income tax

Complex. Multi-state LLCs typically need a CPA firm with multi-state expertise.

Common Mistakes

Mistake 1: Missing the NY LLC Filing Fee deadline

$25-$4,500 depending on revenue. Due March 15. Miss it = $25 late fee + interest. Small in dollars but creates a compliance black mark.

Mistake 2: Forgetting SE tax

Members who actively work in the LLC owe SE tax on K-1 income. "The LLC pays me distributions, not salary, so no SE tax, right?" Wrong — distributions to active partners ARE self-employment income.

Mistake 3: Not issuing K-1s timely

K-1s must be issued to members by March 15 (or April 15 without partnership return extension). Late K-1s mean members file late personal returns + late penalties for everyone.

Mistake 4: Skipping the PTET election evaluation

NY's Pass-Through Entity Tax (PTET) election saves federal SALT cap limits for many multi-member LLCs. Worth checking with your CPA annually.

FormifyAI's NY Multi-Member LLC Package

[NY Multi-Member LLC formation](/form-llc/new-york):

- Articles of Organization filed (with multi-member setup) - Operating Agreement customized for multi-member governance (voting rights, distribution policy, buyout provisions) - EIN filing - Registered agent service - NY LLC Filing Fee reminders - CPA partner referrals for 1065 preparation

$39/mo annual plan per LLC. Formation: 3-5 business days.

What to Do Next

If you're forming a multi-member LLC in NY, budget $25-$4,500/year for the LLC Filing Fee (depending on revenue) on top of federal and state tax obligations. Get a CPA familiar with multi-member partnerships before tax time.

If you already have a NY multi-member LLC, check: is your 1065 due this year? Have you evaluated PTET election? Do all members understand their K-1 will arrive in March? [FormifyAI's compliance reminders](/sign-up) keep you ahead of the deadlines.