How Do LLC’s File a Tax Return?
For tax purposes, one member LLCs are treated as a sole proprietorship and do not need to file a tax return with the IRS. However, you must report all profits and losses of the LLC on a Schedule C and submit that with your 1040 tax return.
If your LLC has two or more members the IRS automatically considers your LLC as multi-member (or partnership). As with a one member LLC (or sole proprietorship) each member of the partnership must report a portion of the profits and losses of the LLC on their personal income statement. The portion of tax each member is responsible for paying is in proportion to the member’s interest in the LLC. Also, even though the partnership does not pay taxes the partnership must file a FORM 1065, U.S. Return of Partnership Income. In addition, each partnership owner must attach a Schedule K-1 to their Form 1040.
Furthermore, if the two members of the LLC are spouses and are filing a joint tax return you can choose to be treated as a single member LLC and report all income and expenses on Schedule C of your individual tax returns. If you have elected to have your LLC to be treated as a corporation then you are required to file a corporate tax return even if the LLC has no income.
It is very important to understand your LLC tax filing status and whether it is obligated to file an income tax return and if so which type of return. Filing the correct required returns on time can help your LLC avoid fines and penalties.
If you have more questions, feel free to reach out to us!