I have an LLC that files a Form 1065 and issues K-1s to two members. Except for "Business Startup and Organizational Costs" (that we used last year), I don't see where the business deducts its ongoing operating expenses on Form 1065. "Other Deductions" does not seem to allow for or cover ordinary operating expenses. Where are these expenses deducted, or are the LLC members supposed to deduct business operating expenses on their Form 1040?
All business income and expenses must be reported on Form 1065 and will flow through to the partners via Form K-1 which will provide information to be reported on the partner’s Form 1040. Business expenses should not be reported directly on the partners’ Forms 1040.
There are not many specific line items for operating expenses and on Form 1065 so most will go under other deductions. The instructions for Form 1065 Line 21 state “enter total allowable trade or business deductions that aren’t deductible elsewhere on page 1 of Form 1065.”
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