How to File Taxes for an LLC Company

By River Braun, J.D.

How to File Taxes for an LLC Company

By River Braun, J.D.

Before you file taxes for a limited liability company (LLC), you must determine how the Internal Revenue Service (IRS) treats the business for tax purposes. The IRS does not have a specific tax section for LLCs, so they are taxed as other business entities, such as an S corporation, a C corporation, a partnership, or a sole proprietorship. Before forming your entity, you should identify your options and consider which type of taxation is right for you.

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Filing Taxes as a Single-Member LLC

A single-member LLC is taxed in the same way a sole proprietorship is taxed. However, you can choose to have your company taxed as an S corporation if it meets the qualifications and elects to be taxed as a corporation.

Report Income or Losses

If you own an LLC and choose not to be taxed as an S corporation, then you need to report the income or loss on your personal income taxes under Schedule C - Profit or Loss from Business (Schedule C). You need to use Schedule E from your personal income tax return to report passive income for the LLC, such as income from trusts, rents, or royalties.

Determine Self-Employment Requirements

You may be required to pay a self-employment tax if the net gain from the LLC is over the minimum of $400 for the tax year. If you are required to pay self-employment taxes, you need to complete and attach Schedule SE - Self Employment Tax (Form 1040 SE) to your personal income tax return.

Got Employees? Submit Form 941

LLCs that have employees must also report taxes. If federal withholding taxes for your employees exceed $1,000 per year, you are required to file the Employer's Quarterly Federal Tax Return (Form 941) each quarter. If the amount of federal income tax withheld from employees is $1,000 or less, you can use Employer's Annual Federal Tax Return for Agricultural Employees (Form 943) at the end of the year to report the withholding.

Distribute W-2s to Employees

You must also provide each employee with a Wage and Tax Statement (Form W-2) and file a copy of the W-2 and Transmittal of Wage and Tax Statements (Form W-3) with the Social Security Administration. Remember, you must pay employment taxes from a bank account that has the LLC as the primary account holder with its unique federal employer identification number (EIN) attached to the account.

File Taxes as a Multi-Member LLC

Companies that have more than one member will default to a partnership tax structure by the IRS. Again, if it meets certain requirements, you may elect S corp. taxation.

File Form 1065

Unless you elect taxation as an S corp., you must file a U.S. Return of Partnership Income (Form 1065) each year for the LLC. Form 1065 reports the distribution or allocation of the net profit or net loss to each of the members.

Send K-1s

The LLC must complete and forward a Partner's Share of Income, Deductions, Credits, etc. (Schedule K-1) to each member detailing the amount of net profit or net loss allocated to the member. The member uses the information on Schedule K-1 to file his or her personal income tax return.

Determine Self-Employment Requirements

Members of an LLC are also considered self-employed for tax purposes. Therefore, they must complete the required schedule and pay self-employment taxes if they received more than $400 during the year.

Determine Employee Requirements

In addition, a multi-member LLC has the same requirements for reporting employment taxes as a single-member LLC. Therefore, it must complete and file the required employment tax forms, either quarterly or annually, and provide employees with a copy of its W-2 statement.

If you are trying to decide which type of taxation is right for your business, you should first determine if you are going to have employees working for you. After that, you can speak to a tax specialist who can help you identify what makes the most business sense for your company.

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.

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