How do I File Taxes for an LLC?

By Terry Masters

A limited liability company, or LLC, is formed under state law but is not recognized as a business classification by the IRS. An LLC must choose how it will be taxed by electing treatment as a sole proprietorship or a corporation, if it is a single-member LLC, or as a partnership or a corporation, if it is a multi-member LLC. An LLC electing treatment as a corporation can make an additional election to be taxed as an S corporation. The way an LLC files taxes depends upon the tax elections it has made.

A limited liability company, or LLC, is formed under state law but is not recognized as a business classification by the IRS. An LLC must choose how it will be taxed by electing treatment as a sole proprietorship or a corporation, if it is a single-member LLC, or as a partnership or a corporation, if it is a multi-member LLC. An LLC electing treatment as a corporation can make an additional election to be taxed as an S corporation. The way an LLC files taxes depends upon the tax elections it has made.

Step 1

Complete and file Schedule C, Profit or Loss from Business, as part of your individual Form 1040 if your LLC has elected to be taxed as a sole proprietorship. Sole proprietors pay federal income taxes on business profit and loss by including the amounts on Schedule C of a personal income tax return. Substitute Schedules E, F or J for Schedule C if your business deals with specialty income, such as farming or fishing.

Ready to start your LLC? Start an LLC Online Now

Step 2

Complete and file IRS Form 1065, U.S. Return of Partnership Income, and distribute a Schedule K-1 to all members if your LLC has elected to be taxed as a partnership. A partnership is a pass-through entity, meaning the partnership doesn't pay federal income taxes itself. The business passes profit and loss through to its owners. The owners record their proportionate share on their personal income tax return and pay taxes on it at the individual rate. Form 1065 is an information return that allows the business to prepare and distribute a Schedule K-1 to each owner. The K-1 is the partnership equivalent of a W-2.

Step 3

Complete and file IRS Form 1120, U.S. Corporation Income Tax Return, if your LLC has elected to be taxed as a corporation, or Form 1120S, U.S. Income Tax Return for an S Corporation, if your LLC has made the additional election to be taxed as an S corporation. Electing treatment as a S corporation is another way for an LLC to be taxed as a pass-through entity. An S corporation also produces a Schedule K-1 that is distributed to owners in lieu of the S corporation paying taxes itself.

Step 4

Complete and file all federal employment tax forms and returns. If your LLC has elected treatment as a sole proprietorship or partnership, the owners are subject to self-employment tax on income from the business and must file Schedule SE, Self-Employment Tax. If the LLC has had employees, it may need to file Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, and Form 941, Employer's Quarterly Federal Tax Return, or Form 944, Employer’s Annual Federal Tax Return.

Step 5

Contact your state's tax authority to determine what state forms your LLC must file to satisfy state income tax obligations. Typically, the state return will be the analogous counterpart to the federal tax return, so if you filed a partnership return with the IRS, you should be looking for the state version of the partnership return. However, some states don't assess business income taxes. Other states don't recognize the federal tax elections in the same way as the federal government, particularly in regard to the S corporation. Call your state tax authority directly to make sure your LLC complies with state law.

Step 6

Contact your state's department of employment and state tax authority to determine what to file to satisfy employment tax obligations and any other miscellaneous state tax, such as sales tax.

Ready to start your LLC? Start an LLC Online Now
Can an LLC Be Taxed Like an S Corp?

References

Resources

Related articles

How to Report Income as an LLC Member

Unless the members of an LLC elect otherwise, the IRS treats an LLC as a pass-through entity for tax purposes. This means that income for LLCs is reported on the personal tax return of the owner or owners, called members. Multiple member LLCs are taxed as partnerships, with each member's individual tax returns reflecting a share of gains or losses of the partnership. An LLC, however, can also elect to be taxed as a corporation.

How an LLC Claims Profit and Losses

A limited liability company, or LLC, is a business entity type that has a history in the United States that spans decades rather than centuries. The relative newness of the format means that the Internal Revenue Service has yet to recognize the LLC as a specific tax entity type. Instead, the IRS classifies an LLC as one of the existing entity types that are defined in the tax code, based on the number of owners, known as members, and the tax elections those owners make. Single-member LLCs can elect to be taxed as a sole proprietorship or a corporation. Multiple-member LLCs can elect to be taxed as a partnership or a corporation. The way a LLC claims profits and losses depends on this tax election.

How to Terminate an S-Corp Election & Revert to an LLC

A qualifying LLC that has previously elected to be treated as a corporation for federal tax purposes by filing IRS Form 8832 and that has also elected S corporation treatment by filing IRS Form 2553 may reverse both elections to revert to treatment simply as a non-corporation partnership or sole proprietorship.

LLCs, Corporations, Patents, Attorney Help

Related articles

What Is an LLC 1065 Filer?

Though a business may select to be an LLC under state law, the federal government does not allow a business to file ...

How to File Taxes for an LLC Company

How you file taxes for an LLC depends on how the business is treated by the IRS. A single-member LLC is treated as a ...

How do I Report Income From an LLC?

A limited liability company, or LLC, is a “hybrid” type of business organization that combines the limited ...

How to File For Sole Proprietorship With Losses

A sole proprietorship is a form of business which operates as the alter ego of the owner and is not a separate legal ...

Browse by category