Tax Filing for an LLC

LLC Not Recognized by IRS

The IRS does not recognize a limited liability company as a business classification for federal tax purposes. This is why there is no federal tax form with the title "Limited Liability Company". The only business classifications recognized by the IRS for federal tax purposes are sole proprietorships, partnerships, and corporations.

Federal Tax Forms Filed by LLCs

Single-member LLC:

The default tax treatment for a single-member LLC is that of a sole proprietorship. Therefore, the owner of a single-member LLC files Schedule C to report business income and expenses.

Multiple-member LLC:

The default tax treatment for a multi-member LLC is that of a partnership. Therefore, Form 1065 is filed for the partnership to report the partnership's income, deductions, credits, gains, and losses. Form 1065 is an information return. A partnership is a tax-reporting entity and not a tax-paying entity.

Each partner is issued Schedule K-1 at year-end which reports each member's share of the partnership's income, deductions, credits, gains, and losses. Each partner reports these items on his personal income tax return.

Election Made to be Taxed as a Corporation

The owner of a single-member LLC or the members of a multi-member LLC can elect to have the LLC taxed as a C or S corporation. To be taxed as a C corporation Form 8832 must be filed. To be taxed as an S corporation, Form 2553 must be filed.

C corporations file Form 1120. S corporation file Form 1120S. C corporations are not pass-through entities. S corporations are pass-through entities.

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