Does an LLC File a Tax Return?

LLC Tax Reporting

• An LLC reports taxes separately. The IRS considers a Series LLC one entity. A Series LLC doesn’t file separate returns. You report Series LLC income.
• You file LLC taxes with personal taxes. This applies unless the LLC is a corporation.
• Single member LLC taxes can be filed with your W-2 income. The LLC reports on Schedule C. Single member LLCs don’t file separately from your return.

Reasons for Separate LLC Tax Return

• There are reasons to file an LLC tax return separately. Some owners prefer the IRS treat their company as a "pass-through entity." Lenders may require a separate return for an LLC business loan.

Taxation and Benefits of LLC and Sole Proprietorship

• Filing taxes separately may limit eligibility for state financial aid. Asset protection is a reason to form an LLC. LLCs can provide tax savings in certain situations.
• An LLC allows flexible taxation as a sole proprietorship, partnership, C corp or S corp.

LLC vs Sole Proprietorship

• Liability protection motivates most LLC formations. Corporations and partnerships have lower IRS audit risk than personal returns.
• Forming and filing an LLC costs more. A sole proprietorship is easier to operate but doesn’t protect personal assets.
• An LLC provides liability protection over a sole proprietorship. But both offer similar tax options.
• Does LLC pay taxes directly to the IRS?
• What are the advantages of a sole proprietorship and an LLC?

Conclusion

• An LLC offers similar tax benefits to a sole proprietorship. But an LLC also provides liability protection.
• Take into account the specific advantages and requirements of an LLC or sole proprietorship for your situation.