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Does an LLC Partnership that generates no income (while it prepares a digital product) have to claim minor deductions such as the cost for tax software and filing for its license?

We are filing the 1065 and issuing K1s. However, I was just wondering if we have to go to the trouble of claiming those minor deductions.

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2 Replies
Vanessa A
Employee Tax Expert

Does an LLC Partnership that generates no income (while it prepares a digital product) have to claim minor deductions such as the cost for tax software and filing for its license?

No.  If you have not began to earn income yet because you are not open for business, you could wait to claim these expenses until you were open and then claim them as start up costs when you are actually open for business.

 

If you have no income, nor expenses or distributions, then you would not need to file the 1065 or issue the K-1. 

 

You can however choose to claim the expenses you have incurred even though you are not earning money yet.  This would result in a loss on your 1065 which would also result in a loss on the K-1's which may help to lower the individuals tax liability on their personal return. 

 

So basically, you can choose to claim the costs as start up costs when you do open and not file a return for 2023 or you can claim the losses on your return for this year and let it flow through to the partners to reduce their own individual income. Although you can do it, there is no requirement to file a return if you are not claiming any income at all or expenses at all. 

 

Must a partnership or corporation file an information return or income tax return even though it had...

 

Start Up costs

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Does an LLC Partnership that generates no income (while it prepares a digital product) have to claim minor deductions such as the cost for tax software and filing for its license?

To clarify: We have to file the 1065 since we released a product that has not turned any revenue at this point. We are working on other products with high hopes:) Therefore, the question is: Since we have zero income for this year, can we file the 1065 and not claim the minor deductions to keep it easy? Or are we required to report the deductions since we are filing the 1065?

Thanks:) 

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