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.

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