LLC business start date

[Kanabar]

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

[ColeenD3]

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.

[Kanabar]

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_ · Accepted solution]

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

[jwathanjr]

Hello,

I have an LLC single member for a food truck / catering business my wife and are starting. We are building out our own truck (using extra money from my full-time income that we save), we have business related expenses while we build it out, but are not yet permitted through the state to operate yet. looking at another 1-2 years. What are we required to file and what can we claim as deductions?

Thank You

JW

[Anonymous_]

@jwathanjr Just in general, start-up costs and organization expenses are deductible in your first year of operation. 

You can elect to deduct up to $5,000 of start-up and $5,000 of organizational costs. The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized.

See https://www.irs.gov/publications/p535#en_US_2018_publink1000208901

Business assets become deductible (expensed or depreciated) when they are placed in service.