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New Member

Formed LLC in December made no profit

Llc formation in December made no sales. How should I file my taxes.

6 Replies
Level 11

Formed LLC in December made no profit

Is the LLC a single member LLC? If  YES do a Schedule C in your 1040. If NO, is it a partnership or have you elected a corporation status?

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New Member

Formed LLC in December made no profit

It's a two member LLC. Should I change it's to a corporation status? Would that benefit me ?

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Level 15

Formed LLC in December made no profit

If your multi-member LLC was "open for business" on or before Dec 31 of the tax year, you are required to file a tax return. It doesn't matter if the business produced no income. A multi-member LLC is required to file it's own physically separate 1065 Partnership Return. For that, you have to use TurboTax Business (different from Home & Business). You can get TurboTax Business at https://turbotax.intuit.com/small-business-taxes/

TurboTax Business is not available as an online product, or for MACs. It's for the Windows operating system only.

The 1065 Partnership Return is due to the IRS by March 15th. The late filing penalty is $200 per month, per owner. So if you file it just one day late, you automatically have a $400 late filing penalty.

You must complete and file the 1065 return first, before you can even start your personal 1040 tax return. That's becuase the partnership will issue each owner a K-1 which each owner will require in order to complete their personal tax return. Doesn't matter if the owners are married to each other and filing a joint return either. Additional information below:

Multi-Member LLC – This is a business with more than one owner.  It’s also the exact same as a Partnership (for tax purposes) This type of business also has to register at the state level, and may also be required to obtain an Occupational License from more localized jurisdictions within the state, in which that business will operate.  This type of business will file its own physically separate tax return with the IRS (and state if applicable) referred to as a Partnership Return, on IRS Form 1065. When completing the 1065 (using TurboTax) the business will issue each individual owner a K-1 reporting the income (or loss) of each owner. Each owner will use this K-1 to complete their personal return. So an owner can’t even start their personal return, until after the 1065 Partnership Return has been complete, filed, and all K-1’s issued to all owners.

In the community property states of Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin if you have a multi-member LLC where there are only two owners, those two owners are legally married to each other, and those two owners will be filing a joint 1040 tax return, they have the option of splitting all business income and expenses down the middle and each partner reporting their share of the business income/expenses on a separate SCH C for each tax filer on the joint return. That means your joint 1040 return will have two SCH C’s included with it – one for each owner. But this can present its own problems in the event of divorce, separation. The issues can become even more compounded upon the death of one of the owners. If that deceased owner’s will does not pass all assets to the surviving partner, then that surviving partner can find themselves in a tax hell, not to mention the problems that can arise with the “new” owner or owners.

LLC “Like an S-Corp” – For tax purposes only (and I reiterate: FOR TAX PURPOSES ONLY!!!!!) one can elect to have the IRS treat their single member LLC or multi-member LLC “like an S-Corp” ****FOR TAX PURPOSES ONLY!!!!!****  This means your business is treated like and considered to be a physically separate taxable entity. This is accomplished by filing IRS Form 2553 – Election by Small Business Corporation. This allows you to act as if your single member LLC or multi-member LLC is an S-Corp. But understand that if you want the IRS to treat your LLC like an S-Corp, then the business “must” act like an S-Corp, and follow all the laws, rules and regulations required of an S-Corp by whichever state your LLC is registered in. All business income and expenses is reported on IRS Form 1120-S – Income Tax Return For An S-Corporation. The S-Corp will then issue each owner, investor and/or shareholder a K-1 which they will need before they can even start their personal tax return.  Unlike a single member LLC which is considered a disregarded entity for tax purposes, an LLC that has filed form 2553  “is” considered and treated like a separately taxable entity.

LLC “Like a C-Corp” – For tax purposes only (and I reintereate: FOR TAX PURPOSES ONLY!!!!!) one can elect to the the IRS treat their single member LLC or multi-member LLC “like a C-Corp” ****FOR TAX PURPOSES ONLY!!!!!**** This means your business is treated like and considered to be a physically separate taxable entity. This is accomplished by filing IRS Form 8832 – Entity Classification Election. This allows you to act as if your single member LLC or multi-member LLC is a Corp. But understand that if you want the IRS to treat your LLC like a C-Corp, then the business “must” act like a C-Corp and follow all the laws, reules and reguations required of a C-Corp by whichever state your LLC is registered in. All business income and expenses is reported on IRS Form 1120 – IU.S. Corporation Income Tax Return.

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Level 15

Formed LLC in December made no profit


@JB 72 wrote:

Llc formation in December made no sales. How should I file my taxes.


A multi-member LLC has the same filing requirements as a partnership.

 

If the LLC had neither income nor incurred any expenditures treated as deductions or credits for federal income tax purposes for the tax year, then there is no filing requirement.

 

See https://www.irs.gov/instructions/i1065#idm139898010041312

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Level 15

Formed LLC in December made no profit

then there is no filing requirement.

While that's true at the federal level, it may not be true at the state level. I know in FL if you register your business (any type of business) with an "active" status at any time in the tax year, then the state is expecting something from the business owner. For FL, on a MMLLC/Partnership you are expected to file an activity report (not a tax return) with a filing deadline of May 1st the following year. If you don't, you automatically lose the "active" status and it's a bit over $400 fine to get it reinstated.

So since you had to register your MMLLC with the state for it to be legal, you need to check with your state to see what (if any) filing requirements you may have to meet, even though the business produced no income or incurred no expenses.

I know when I first opened my SMLLC in 2005 I initially set it up and registered it in an "inactive" state. That was because the bank "required" this, and for my business to have a federally issued EIN before I could open a business bank acount. So I can't get the bank account without an EIN, and I couldn't get an EIN for my SMLLC until it was registered with the state.

Once I had everything "set and ready" I simply went online to sunbiz.org, logged into my account and paid the $122 fee to change the business status from inactive, to active. From that day forward I was "open for business". Peice of cake.

FL state laws on this have changed dramatically since I went through this back in 2005. It's my understanding that now-a-days all LLCs registered in FL "must" be registered as "active" on the initial registration. So while you can go on the very next day and change it to inactive, that one day active means that you are "required" to file a report with the state by May 1st of the following year.

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Level 15

Formed LLC in December made no profit

Florida LLCs classified as partnerships only have to file a Florida Partnership Information Return if one or more of its members is a corporation.

 

Florida LLCs (and other entities) do not file an "activity report", they file an annual report which not only has absolutely nothing to do with income taxation, it has nothing to do with financial statements or information and, in turn, has nothing to do with this board or TurboTax.

 

The point here is the statement, "If your multi-member LLC was "open for business" on or before Dec 31 of the tax year, you are required to file a tax return" is simply inaccurate.