Myself and 2 friends started a multi-member LLC this year. We used Nolo and we have our EIN. I have a few questions.
1. Does the LLC itself file a tax return and does it matter who files it?
2. Will I need to buy TurboTax business for the business return?
3. What Turbotax product do I need for my personal taxes to account for my investment/start-up of an LLC?
34 We all put in $15,000 each but we have had no expenses yet and no profit (we just launched) can I claim the $15,000 investment on my personal taxes?
THANKS!
Since this is a multi-member LLC the LLC must file an income tax return. (If this was a single member LLC there would be no requirement for a federal income tax return as the sole owner would simply report the LLC's activity on Schedule C. Too, most states require that any LLC organized in that state file an informational return that's typically not an income tax return per se, and submit a fee to the state.)
The income tax return prepared by the LLC could be a Form 1065 (partnership), a Form 1120-S (Subchapter-S Corp), or a Form 1120 (C-Corp). The LLC makes an election as to how it's going to report. In order to prepare any of these forms you do need to use TurboTax Business.
As far as your personal return goes any of the desktop versions, this year, should be OK since TurboTax has restored all the Forms, Schedules and Worksheets to all versions. In most cases, I'd guess, small LLC's elect to report as a partnership so the preparation of Form 1065 also results in a Schedule K-1 for each partner reporting the activity that the LLC has "passed through" to the partners. You enter the information off the Schedule K-1 into your own Form 1040 by using the "Schedule K-1" interview. TurboTax then scatters these numbers around your personal income tax return as needed.
You can't "claim" the $15,000 initial investment as a deduction on your personal income tax return. You've made an "investment" here - similar in some ways to buying a stock through your broker. The activities of the LLC passed through to you on Schedule K-1 will be what you report. These activities will also affect your "basis" in the LLC and it's that adjusted basis that you'll report if and when your sell your ownership in the LLC.
Tom Young
Since this is a multi-member LLC the LLC must file an income tax return. (If this was a single member LLC there would be no requirement for a federal income tax return as the sole owner would simply report the LLC's activity on Schedule C. Too, most states require that any LLC organized in that state file an informational return that's typically not an income tax return per se, and submit a fee to the state.)
The income tax return prepared by the LLC could be a Form 1065 (partnership), a Form 1120-S (Subchapter-S Corp), or a Form 1120 (C-Corp). The LLC makes an election as to how it's going to report. In order to prepare any of these forms you do need to use TurboTax Business.
As far as your personal return goes any of the desktop versions, this year, should be OK since TurboTax has restored all the Forms, Schedules and Worksheets to all versions. In most cases, I'd guess, small LLC's elect to report as a partnership so the preparation of Form 1065 also results in a Schedule K-1 for each partner reporting the activity that the LLC has "passed through" to the partners. You enter the information off the Schedule K-1 into your own Form 1040 by using the "Schedule K-1" interview. TurboTax then scatters these numbers around your personal income tax return as needed.
You can't "claim" the $15,000 initial investment as a deduction on your personal income tax return. You've made an "investment" here - similar in some ways to buying a stock through your broker. The activities of the LLC passed through to you on Schedule K-1 will be what you report. These activities will also affect your "basis" in the LLC and it's that adjusted basis that you'll report if and when your sell your ownership in the LLC.
Tom Young
I highly recommend going to a tax professional for at least the first year. They can help you figure things out and start things off correctly.
Please get some professional help for this first year, to ensure that you do everything correctly for both Federal and State(s). Start by reading these:
https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Partnerships
https://www.sba.gov/blogs/6-things-you-need-know-about-your-tax-responsibilities-llc
First thanks for the response! I have read those and we are considering hiring an accountant; however, where I am confused is regarding "pass through" taxation. We opted for this when we filed for our LLC and when we applied for our EIN. So we were under the assumption that we would all 3 just file a tax return and that would be it as we are considered a partnership not a corporation. After reading those very articles, we began to wonder if we needed to file a 1065 or not.