The filing requirements for LLC include paying the proper taxes and submitting formation documents to your Secretary of State.

Tax and Reporting Requirements for LLCs

As a limited liability company owner, it's important that you understand the tax filing and reporting requirements in your state. Every member of an LLC should make a point to learn about the annual report requirement in their state. Neglecting to pay your LLC taxes or file an annual report can result in very expensive penalties. Another name for an LLC's annual report is a Statement of Information. This statement should be filed with the correct state agency or regulatory board.

Since LLCs are governed by state laws, every state has distinct rules for these companies, which can include:

  • Whether a company report needs to be filed.
  • How often this report should be filed.
  • The filing fees for LLCs.
  • What documents are used to report important LLC changes.

While limited liability companies are generally treated as pass-through entities federally, there can be other tax rules at the state level that need to be considered. For instance, your multi-member LLC may be required to file an information report even if it isn't being taxed at the entity level. Your company may be subject to a variety of taxes and may need to file a tax return with multiple local and state agencies. Fortunately, forming an LLC allows you to choose how your business earnings will be taxed by the IRS.

In certain circumstances, an LLC may go an entire year without engaging in any business activity. For instance, if an LLC has just been formed, it may not have started business activities yet. Plus, an older LLC may have ceased business activities to prepare for dissolution. Even if your LLC is inactive, meaning it hasn't earned income or incurred expenses, you still may need to file a tax return.

Limited liability companies can take many forms when it comes to taxation. LLCs can choose to be taxed as several different types of business entity:

  • S corporations
  • C corporations
  • Partnerships
  • Sole proprietorships

There are default tax classifications for both single-member and multi-member LLCs. The tax status you choose for your LLC will determine the filing rules to which your company is subject. By default, LLCs that have more than two members will be treated like a partnership for tax purposes. Single-member LLCs are considered disregarded entities. This means that the LLC does not exist for the purpose of federal taxation. Because LLCs can choose different tax statuses, there are no IRS rules that apply exclusively to this business entity.

When it comes to income taxes, the IRS will treat your LLC as a partnership after it has been formed. If you are the only member of your LLC, your business profits will be taxed as they would be with a sole proprietorship. There are distinct filing rules for each of these designations. If you would like your LLC to be subject to corporate filing rules, you can submit IRS Form 8832 to elect corporate tax status. After electing corporate tax status for your LLC, you will not be able to change your status for five years.

LLC Partnership Filing Requirements

If your LLC is subject to tax rules for partnership, you are not personally responsible for paying business earnings taxes. However, you will need to use IRS Form 1065 to prepare an annual partnership tax return.

The purpose of this return is informational only. Individual company owners will need to report several pieces of information:

  • Credits
  • Deductions
  • Income

With an LLC partnership, you will not have to pay taxes at the entity level. At the end of the year, your LLC will use a Schedule K-1 form to report the income and losses that have been distributed to each company owner. For instance, if you run an LLC with another person, both of you will be provided a Schedule K-1 form that includes information about your individual earnings and deductions. You will then report the information on your K-1 form on your individual return.

If your LLC is not active, you are not required to file a partnership tax return unless you intend to claim credits or expenses.

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