LLC Need To File?

[Davinci8]

I started an LLC with another household in 2021 to flip houses.  We bought a house and are working on it, but haven't passed papers, so there were only expenses and no income in 2021 for the LLC.  We paid a few workers via 1099s and those were filed, but since there was no income, do we need to file anything for the business for 2021?

Also, since this is spread across a couple of tax years, do we still get to count all the expenses as if it was raising the basis of a personal house?

Thanks.

[ErnieS0]

Probably. I'm assuming you formed a partnership because you say "I started an LLC with another household."

Every domestic partnership (with certain exceptions) must file a partnership return, unless it neither receives income nor incurs any expenditures treated as deductions or credits for federal income tax purposes.

You would capitalize your expenses (meaning you would add them to the cost of your property). You'll been able to deduct the purchase price plus improvements against the sale price to reduce your taxable gain.

See Alumni Tax Expert @Coleen3's answer in How do I treat rental property repairs before placing it into service?

You may have some deductible operational expenses for the partnership.

[Davinci8]

Thank you for the amazingly fast reply.  

I've gone through the Turbotax Business program now and I'm still wondering about this.

Possibly I should have been a little more complete with my info, however, to help show how new I am to this.  Last year I created a formal LLC with my sister and her husband with a CPA (with the tax ID, paid liability insurance, etc) when I retired last year.  We bought a wreck of a house in 2021 and after months of sweat equity, are waiting to pass papers on the sale in about a week, which will have a profit.  I thought the CPA we used charged quite a bit to set up the LLC, however, and wondered just how complicated a tax return could be for an LLC that had no income in 2021.

I've always been fine doing my own personal taxes even though they have sometimes been involved, but this is my first business venture.

Since the business had no income last year, I can't see how I can deduct anything for the business, especially since the improvement expenses will be taken into account with the property sale this year.  Even the costs to start the LLC, as in the CPA costs and filing fees I don't imagine can be deducted if there is no income to reduce.  Of course I could be entirely missing something.  Am I wrong to think that if there is no income then we can't take a deduction?  Or is it that we need to file so that there is a record somewhere even though there was no income to tax?

I'll certainly have to do a personal tax return because I retired mid year and have personal income from my former job, but my giant guess was that with no income from the LLC, it isn't likely to affect those taxes.  Or am I supposed to take my fraction of the operating costs like the LLC filing fees to reduce income from my former job? (I don't expect that to be true.)

My fear is that this is too complicated to do by myself this first year, of course.

Am I missing something really important here?

Thanks Again.

[ColeenD3]

You need to file Form 1065. You had expenses and you paid contractors. The partnership will have a loss.

Except as provided below, every domestic partnership must file Form 1065, unless it neither receives income nor incurs any expenditures treated as deductions or credits for federal income tax purposes. Form 1065

A partnership is the relationship between two or more people to do trade or business. Each person contributes money, property, labor, or skill, and shares in the profits and losses of the business.

Publication 541, Partnerships, has information on how to:

• Form a partnership
• Make partnership distributions
• Understand exclusion rules
• End a partnership

Reporting Partnership Income

A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it "passes through" profits or losses to its partners. Each partner reports their share of the partnership's income or loss on their personal tax return.

Partners are not employees and shouldn't be issued a Form W-2. The partnership must furnish copies of Schedule K-1 (Form 1065) to the partner.