How to Report Income as an LLC Member

By Joseph Nicholson

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.

Step 1

File profit or loss from business on Schedule C. As a member of an LLC, you must report business income on Schedule C to Form 1040. This form contains lines that help you calculate your profit or loss and deduct appropriate expenses. The final result can be carried over to Form 1040 to help calculate your personal federal income tax liability. If your business is a multi-member LLC, you should receive a Schedule K-1 reporting your share of the profit.

Step 2

Report passive income on Schedule E. Supplemental income earned by a single- or multi-member LLC through ownership of real estate or intellectual property can be reported on Schedule E to Form 1040. From rents and royalties received, you can deduct certain expenses listed on the form and calculate either a profit or loss that can be used to complete Form 1040. If your business is a multi-member LLC, you should receive a Schedule K-1 reporting your share of the income.

Ready to start your LLC? Start an LLC Online Now

Step 3

File Form SE for self-employment tax. Members of an LLC are considered self-employed and must file Form SE to calculate the amount of self-employment tax owed unless their income from the business is less than $400.

Step 4

File multi-member LLC income on Form 1065. If your business is a multi-member LLC taxed as a partnership, the business itself must report its income on Form 1065. The business's taxes will still be paid by each individual member as reflected on their Schedule K-1 and reported in their individual returns, but this form helps the IRS ensure the business's income is being reported appropriately.

Ready to start your LLC? Start an LLC Online Now
How to File Taxes for an LLC Company

References

Resources

Related articles

How Is Passive Income Taxable to an S Corporation Shareholder?

A chief benefit of being an S Corporation is that it allows the corporation’s shareholders to be taxed directly on all income earned by the business. Owners benefit from direct taxation because a C Corporation's profits are taxed twice: once when earned by the corporation and again when distributed to the owners as a dividend. When an S Corp shareholder pays taxes on the business’s income, the funds are broken down based on how the S Corp earned the money. As a result, a shareholder may pay different tax rates on different portions of her S Corporation’s income. One aspect of S Corporate income that may be taxed differently is the business’s passive income.

What Is an LLC Proprietorship?

A proprietorship is a type of business structure in which the owner of the business and the business itself are the same legal entity. Limited liability companies, or LLCs, have great flexibility under state and federal law as to how they are organized and operated. One option for an LLC is to be taxed as a proprietorship.

Net Operating Loss for a Sole Proprietorship

It isn’t uncommon for sole proprietors to report losses in some years, which are the result of incurring business expenses that exceed total revenue. You may be able to use these losses to offset some of the other income reported on your tax return. However, if after combining your sole proprietorship losses with your other income the result is still a loss, you may have a net operating loss, or NOL, that you can deduct from the taxable income you report in different tax years.

LLCs, Corporations, Patents, Attorney Help

Related articles

What Tax Forms Are Needed for an LLC?

Federal tax law does not provide specific rules that govern every limited liability company. Instead, the Internal ...

Difference Between LLC & Inc

A limited liability company, or LLC , is a hybrid business entity that includes some features of corporations. For ...

What Forms Do I Need to File for an S Corp?

An incorporated business is automatically designated by the Internal Revenue Service as a C corporation for income tax ...

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 liability ...

Browse by category
Ready to Begin? GET STARTED