LLCs default to sole proprietors or partnerships for taxes. Sole proprietor LLCs pass income and expenses to owners. Partnership LLCs pass deductions to partners and IRS via Form 1065 yearly. Some LLCs file as corporations. C-corps use Form 1120. S-corps use Form 1120S. Both pass income to shareholders. Shareholders of S and C corps report income on personal returns, avoiding double taxation. LLCs with no income may still need tax returns per state rules or inactive status.
Deductions and Losses
LLCs can write off investments, deduct expenses, or carry losses forward. Truly worthless investments qualify for write offs on Form 8949. Losses help lower or eliminate tax burden. Most LLC structures let owners claim losses personally. But C-corps cannot pass losses to owners’ returns.
Compliance for Non-Profitable LLCs
Even no income LLCs should file returns. It shows deduction history and tax exemption compliance. And it maintains state good standing. Not filing risks penalties and back taxes. Some states charge fees to LLCs regardless of income. California charges $800 to operating or organized LLCs there.