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.
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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.
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.
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.
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.
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.
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.
References & Resources
- IRS.gov: Limited Liability Company (LLC)
- IRS.gov: Single Member Limited Liability Companies
- IRS.gov: LLC Filing as a Corporation or Partnership
- IRS Publication 3402: Tax Issues for Limited Liability Companies
- IRS.gov: Forms for Limited Liability Companies (LLC)
- Business.gov: Limited Liability Company
- IRS Form 1040 Schedule C: Profit or Loss from Business (Sole Proprietorship)
- IRS Form 1065: U.S. Return of Partnership Income
- IRS Form 1120: U.S. Corporation Income Tax Return
- IRS Form 1120S: U.S. Income Tax Return for an S Corporation
- IRS Schedule SE: Self-Employment Tax
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