Updated June 23, 2020:

Filing taxes for LLC with no income will depend on the way the LLC is taxed. An LLC can be taxed as either a sole proprietorship, partnership, or corporation. An LLC may be omitted as an entity for tax purposes, or it may be taxed as a corporation or partnership.

Do You Need to File a Tax Return for an LLC With No Activity?

There may be some years where a limited liability company (LLC) has zero business activity. Newly formed LLCs may not officially begin operating as a business for a year or more, and older LLCs may slowly become irrelevant without being properly dissolved. LLCs that have become inactive or have no income may still be mandated to file a federal income tax return. Filing requirements will depend on how the LLC is taxed. An LLC may be taxed as a corporation or partnership, or it may be totally disregarded as an entity with no requirement to file.

What Are the Tax Elections?

When an LLC only has one member, the Internal Revenue Service (IRS) will automatically ignore it regarding federal tax liability. This is because the LLC member's expenses and income will appear on their individual tax return. When an LLC has two or more members, the IRS will automatically treat it as a partnership. Therefore, the LLC will file an informational return to report their income, gains, losses, deductions, credits, etc.

A partnership does not pay tax on its income, but “passes through” any profits or losses to its partners. Partners must include partnership items on their tax or information returns. An LLC has the option to change this default tax arrangement and instead decide to be taxed like a corporation. To accomplish this, the LLC needs to file Form 8832 with the IRS. The LLC can choose this option when it's formed or at a future date.

Filing for Disregarded Entities

When they're not treated a separate entity, LLCs are taxed similar to sole proprietorships. In other words, their expenses and income are filed on Schedule C of their members' personal tax returns. Schedule Cs must be filed for all LLCs that generate income of more than $400 annually.

A single-member LLC, without any expenses to deduct and no business activity, is not required to file the LLC's income on Schedule C. Remember, the member will need to file an individual tax return, and may need to complete a Schedule C for self-employment income.

Filing for an LLC Partnership?

An LLC is taxed like a partnership and will need to file an informational partnership return, unless it hasn't had any expenses that it can claim as deductions or credits and didn't receive any income during the course of the year. In other words, an LLC that is taxed as a partnership, with no business activity, will not be required to submit a partnership return unless there are credits or expenses that the LLC would like to claim.

Filing for an LLC Corporation?

Corporations must file a federal tax return annually, even if they have no income. Therefore, when an LLC decides to be taxed as a corporation, it is agreeing to submit an annual tax return in perpetuity. Remember, your LLC may need to file a federal tax return even if it has no business activity. It will solely depend on your LLC tax filing status. Be sure to file on time to avoid any penalties and fines.

Do You Need to File a Separate LLC Tax Return?

LLCs are registered with the states in which they incorporated. Therefore, they're not required to file federal tax returns unless they've decided to file as corporations. If they've chosen to file as corporations, they will have fallen into one of two categories:

  1. Single-member LLC filing Form Schedule C
  2. Multi-member LLC filing Form 1065

Some states will require LLCs to submit separate LLC tax returns.

When Your Company Made Little or No Money

Usually, LLCs that have elected to be taxed as a general partnership or sole proprietorship are not required to file a federal tax return with the IRS. A few states require partnerships or sole proprietorships to file tax returns, even though they're "pass-through" entities. LLCs that have decided to be taxed as corporations will have to file a federal tax returns annually, regardless of business activity. Therefore, it may be a costly error to change the default tax status from a partnership or sole proprietorship to a corporation if the business has no activity.

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