Do I Need to File a Tax Return for LLC with No Activity?

By Larissa Bodniowycz, J.D.

Do I Need to File a Tax Return for LLC with No Activity?

By Larissa Bodniowycz, J.D.

Even if your limited liability company (LLC) is inactive, you may still have tax reporting obligations. Unless you formally dissolve your business, your business still has tax reporting obligations—even if it is inactive and you no longer want to continue operating the business. You should formally dissolve your LLC if you want to end your business in order to avoid accruing future tax penalties.

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Federal Tax Filings for Inactive Businesses

Because the Internal Revenue Service (IRS) does not recognize an LLC business form for tax purposes, you must designate an alternative tax classification for your business. As with any LLC, the tax filing requirements for an inactive LLC depend on its tax status election. Here are the requirements for each tax status.

C Corporation Status

If you elected C corporation status for your LLC, you are still required to submit a federal tax return even if your LLC is inactive and did not engage in any business or receive any income during the year.

File a U.S. Corporation Income Tax Return (Form 1120). Submit a "zero return" and enter zeroes on all applicable lines to show there were no sales, no expenses incurred, and no tax credits earned.

S Corporation Status

If you elected S corporation status for your LLC, you are still required to submit a federal tax return even if your LLC did not earn any income during the year. The only exception to this requirement is for some tax-exempt entities formed under Section 501 of the Internal Revenue Code.

File U.S. Income Tax Return for an S Corporation (Form 1120S), an informational return reporting income, deductions, profits, losses, and tax credits. If your business has been inactive for the entire year, submit a "zero return" by entering zeroes on all applicable lines to show no sales generated, no expenses incurred, and no tax credits earned.

Partnership Status

If your LLC has more than one member, by default the IRS treats it as a partnership for tax purposes. Generally, partnerships must file a U.S. Return of Partnership Income (Form 1065), an informational tax return reporting income, deductions, gains, and losses each year. Partnerships must also furnish copies of Partner's Share of Income, Deductions, Credits, etc. (Form 1065, Schedule K-1) to each member.

However, you do not need to file Form 1065 if your LLC did not receive any income during the year and is not claiming any expenses as deductions or credits, as it is an informational tax return.

Disregarded Entity Status

By default, the IRS treats your LLC as a "disregarded entity" if it only has one member. Your LLC is, then, essentially taxed as a sole proprietorship. All LLC income is attributed to you as the single member. Report any LLC income and expenses on Profit or Loss From Business (Sole Proprietorship) (Form 1040, Schedule C).

If your LLC did not have any business activity during the year and did not incur any expenses you want to deduct, you do not have to file Schedule C. You still need to file a personal tax return, however, if you had other income. You must also file a Schedule C if you had self-employment income from a different business.

State Tax Considerations

In addition to federal requirements, your LLC may have state tax reporting obligations. State requirements vary. Check your jurisdiction's requirements to avoid tax penalties for failure to file a state return. In many states, you must file a return even if you did not have any business activity during the year.

If you need help with understanding your tax obligations or other aspects of operating your LLC, you should consult with an attorney. Alternatively, for assistance dissolving an inactive LLC, you may want to work with an online service provider.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.