Filing Taxes for LLCs
In this guide, we will take you step-by-step through the filing process of the most common LLC tax structures—disregarded entities (Single-Member LLCs) and partnerships (Multi-Member LLCs).
Taxation of Single-Member LLCs
Single member LLCs are treated like sole proprietorships when it comes to taxes, unless they elect to be a corporation. Therefore, the IRS treats the LLC as a “disregarded entity,” which means you report all of your profits and losses on your personal tax return, otherwise known as form 1040. Owners who earn at least $400 must pay self-employment tax on Schedule SE, Section B.
Taxation of Multi-Member LLCs
If you are a Multi-Member LLC, the IRS considers you to be a partnership for tax reasons. Your taxes, like those of a Single-Member LLC, will travel through the LLC and onto the personal tax returns of each owner. Multi-Member LLCs, unlike Single-Member LLCs, do not need to complete a Schedule C form. Instead, the owners will complete paperwork outlining the entire partnership revenue as well as their personal portion.
Tax Filing Requirements
Generally, for 2020 taxes, a single individual under age 65 only has to file if their adjusted gross income exceeds $12,400. However, if you are self-employed, you are required to file a tax return if your net income from your business is $400 or more.
Filing LLC Taxes
It is important to file taxes for an LLC with expenses and no income. LLCs have the unique ability to be taxed in many ways, and each taxation status has a set of rules for business tax filings. Don’t forget about state tax filings.
Taxation of LLCs Electing C-Corp Tax Designation
LLCs who elect the C-corp tax designation are not regarded as pass-through entities. They are considered legally separate from the owners and are therefore required to file their LLC taxes separately from their personal tax returns.