The IRS treats single-member LLCs (LLCs with one owner) as sole proprietorships for tax purposes. This means that the LLC itself doesn’t pay taxes and doesn’t have to file a return with the IRS. As the sole owner of your LLC, you must report all profits (or losses) of the LLC on your 1040 tax return.
LLCs can choose corporate tax status by making a tax election, allowing the LLC to file taxes as a C-corporation or S-corporation rather than a pass-through entity. To do so, the LLC must file paperwork with the IRS but will still operate legally as an LLC.
If you fail to file your taxes on time, you’ll likely encounter a Failure to File Penalty. The penalty represents 5% of your unpaid tax liability for each month your return is late, up to 25% of your total unpaid taxes.
To be taxed as a C-Corporation, an LLC must file Form 8832. Owners will need to submit Schedule K-1 if electing to be treated as an S corporation since the S corporation itself does not file taxes.