LLC business start date

Forum|Forum|6 years ago
January 31, 2020
5 replies
62 views

Hello,

my wife and I created a LLC around June 2019 to rent a house. However we got delayed in our projects, and we only put this house on the market for rent mid-January 2020. Hence, no income for the LLC in 2019.

In the book "Every landlord tax deduction guide" from Nolo, I read this: "A new business begins for tax purposes when it starts [...] to perform the activities for which it was organized. For a rental business, this is when you first offer property for rent"

Does this mean that right now I have nothing to file regarding taxes for this LLC? In other words, I can file my taxes as if this LLC did not exist as from the IRS point of view it started existing mid Jan 2020?

Thank you for your advice,

Kanabar

Not A Product Question

Best answer by Anonymous_

Multi-member LLCs are treated the same as partnerships for federal income tax filing purposes.

The entities are required to file an income tax return (Form 1065) unless they neither receive income nor incur any expenditures treated as deductions or credits for federal income tax purposes.

See https://www.irs.gov/instructions/i1065#idm139898010037856

ColeenD3

Level 15

If your LLC is an official entity, such as a Corporation or Partnership, you must file a return even if there was no income.

For a single member LLC (considered a disregarded entity) for US federal income tax purposes, you will only file if you have income. In 2021, you would include the rental income and expenses on a Schedule E attached to your personal income tax return. You do not report anything until the property is placed in service and available for use.

You mentioned that both you and your wife own the LLC. You must then elect to be treated as a Partnership or Corporation. You do not qualify as a Qualified Joint Venture unless you are in a community property state.

A qualified joint venture, for purposes of this provision, includes only businesses that are owned and operated by spouses as co-owners, and not in the name of a state law entity (including a limited partnership or limited liability company)

If you In 2021, you will include the rental income and expenses on a Schedule E attached to your personal income tax return. You do not report anything until the property is placed in service and available for use.

KanabarAuthor

Level 2

Thank you for your reply. To express it in terms of IRS forms, is the following correct?

Right now:

"You must file a return even if there was no income" --> Form 1065 only

For next year:

The LLC files again form 1065, as well as form 8825 and gives a Schedule K-1 to each member (me and my wife).
Then we use this Schedule K-1 to file our Schedule E.

Is that accurate?

For this year, which TurboTax product do I need to use to access the 1065 form?

Thank you,

Kanabar

Anonymous_Answer

Level 15

Multi-member LLCs are treated the same as partnerships for federal income tax filing purposes.

The entities are required to file an income tax return (Form 1065) unless they neither receive income nor incur any expenditures treated as deductions or credits for federal income tax purposes.

See https://www.irs.gov/instructions/i1065#idm139898010037856