1. LLC Tax Filing Rules
2. How to File Taxes for LLCs

The IRS forms for LLC filings vary. Limited Liability Companies (LLCs) are required to file one of the following forms, depending on how it has chosen to be taxed:

  • Single-member LLCs will file IRS Form 1040 (Schedule C, E, or F)
  • Single-member LLCs cannot file partnership return forms
  • Multiple-member LLCs may file Form 1065, which is for partnerships
  • S corporations will file IRS Form 1120S
  • C corporations will file IRS Form 1120
  • LLCs who opt to file as a corporation must also file IRS Form 8832

IRS Publication 3402 is Tax Issues for LLCs, and it can provide assistance in determining which tax reporting form is best for your business. Once you elect one tax status, you are required to keep that status for five years.

LLC Tax Filing Rules

Operating as an LLC offers tax flexibility regarding profits and losses. The tax structure you choose determines what tax rules you fall under. There are no separate tax rules for LLCs as LLCs choose whether to be taxed as a sole proprietorship, partnership, or corporation. Once you create the LLC, you default to a partnership in the eyes of the IRS for tax status. If you are the only owner of the LLC, then you are required to pay taxes as if you were a sole proprietorship.

The IRS requires Form 1065 for LLCs being taxed as a partnership. This form is strictly for informational purposes as all income and losses and reported by individual members on their returns. The LLC will also report each member's share on a Schedule K-1 at the end of every year.

LLCs that opt to be taxed as a corporation will be treated as a separate legal entity from its employees for tax purposes. The business is then responsible for reporting all income and losses on Form 1120 and paying owed taxes by the filing deadline.

One drawback to being taxed as a corporation is that the corporation's profits are subject to "double taxation." The first level of taxation occurs at the corporate level, and the second occurs when dividends are paid to members. Each member is required to report the dividend on IRS Form 1040 and pay taxes.

Filing as a sole proprietorship means you are responsible for all taxes and filings. This is what the Schedule C attachment is for. Schedule C is only used for profit and losses that related to the business. If there is a profit showing on the Schedule C, the amount is added to other income reported on IRS Form 1040.

How to File Taxes for LLCs

While an LLC is formed under state law, it is not recognized as a business classification with the IRS. This is why LLCs are required to choose how they want to be taxed.

  • File your 1040 Schedule C if filing as a sole proprietorship.
  • If the LLC chose partnership status, file IRS Form 1065.
  • Complete IRS Form 1120 if you elected corporate taxation. An LLC who chooses to be taxed as a corporation can go one step further and elect S corporation status in some cases if they qualify.
  • File all federal employment tax forms and returns.
  • If there are employees, the LLC needs to file Form 940 which is the Employer's Annual Federal Unemployment (FUTA) Tax Return, and Form 941, which is Employer's Quarterly Federal Tax Return.
  • Check with your respective state's tax department to verify what state forms you need to file to comply with state LLC rules.
  • Verify with your state's Department of Employment what you need to file to satisfy employment tax obligations in the state.
  • Be sure to date and sign the return, whether you are mailing or filing electronically.

An LLC must file a 1099-MISC if the business made payments for rent or any other services that exceed $600 in the year. Verify what other 1099 forms you may need to file. For example, 1099-DIV is used to report any dividends from mutual funds, stocks, money market funds, or other banking products. They can also be used to report real estate transaction proceeds, secured property acquisitions, and any cancellation of debts.

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