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Area51Neighbor
Level 2

I use an LLC to protect myself from any lawsuits for apps I post online. The software doesn't make money. How does the IRS treat business with no losses or gains?

I develop apps that I place online and have an LLC to protect myself from being sued personally. The apps don't generate income.  How does the IRS treat a business that doesn't post a loss or gain?
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rjs
Level 15
Level 15

I use an LLC to protect myself from any lawsuits for apps I post online. The software doesn't make money. How does the IRS treat business with no losses or gains?

If you have no income at all from the activity, the IRS considers it a hobby, not a business. If it produces no income at all, you do not have to report it.


If you have expenses for a hobby, you can claim an itemized deduction for the expenses, but only up to the amount of income from the hobby. If you have no income from it, you cannot deduct any expenses.


A single-member LLC is disregarded for federal income tax purposes. As far as your federal tax return is concerned, the LLC doesn't exist.

 

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rjs
Level 15
Level 15

I use an LLC to protect myself from any lawsuits for apps I post online. The software doesn't make money. How does the IRS treat business with no losses or gains?

If you have no income at all from the activity, the IRS considers it a hobby, not a business. If it produces no income at all, you do not have to report it.


If you have expenses for a hobby, you can claim an itemized deduction for the expenses, but only up to the amount of income from the hobby. If you have no income from it, you cannot deduct any expenses.


A single-member LLC is disregarded for federal income tax purposes. As far as your federal tax return is concerned, the LLC doesn't exist.

 

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