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How to File Taxes for LLC With No Income?

The tax structure of your LLC will dictate whether you must file your taxes in years when you have no business activity. Regardless of whether you are required to file a return, you should always plan to do so.

You might find it counterintuitive to file a business tax return after you hit the "pause" button on your business. In virtually all of these scenarios, LLC taxes will be required, but you should expect to file those taxes every year for as long as your business exists, even if you incur little to no economic activity in the year of filing. The question then becomes: how to file taxes for LLCs with no income?

How an LLC is taxed determines how the LLC must file its tax returns. LLCs may be either taxed as a partnership or corporation, or as disregarded entities for tax purposes. 

What Is A Limited Liability Company LLC

In the United States, a limited liability company (LLC) protects its owners from having any personal liability for its debt or obligations. A limited liability company (LLC) is basically a hybrid entity that combines characteristics of both a corporation as well as a partnership or sole proprietorship.

The statutes governing limited liability companies vary from state to state, as do their regulations. Owners of LLCs are commonly known as members.

Individuals, corporations, foreigners, foreign entities, and even other LLCs are allowed to be members in many states that do not restrict ownership. Several entities, including banks and insurance companies, are not permitted to form LLCs.

LLCs And Their Tax Elections

For federal income tax purposes, the Internal Revenue Service (IRS) disregards any LLC that has only one member (known as a "member"). A member of such an LLC reports income and expenses from the LLC on his or her personal tax return.

The IRS automatically treats LLCs with two or more members as partnerships. Typically, LLC files a partnership tax return that includes information regarding the LLC's income and expenses, in addition to reporting these in their personal tax returns.

LLCs, however, can elect to change their default classifications to become corporations and pay taxes as corporations. This is accomplished by filing Form 8832 with the IRS. As your LLC is formed, you may elect to make this tax classification election, or you will be able to make this election at a later date, if you so choose. Filing taxes for LLC with no income depends on the way LLC is taxed and structured.


Filing Requirements For Sole Proprietors, Partnerships, And Corporations

Let's see the difference between filing requirements for Sole Proprietorships, Partnerships, and Corporations. 

Filing Requirements For Sole Proprietorships

In general, LLCs that are not treated as separate entities for federal income tax purposes are taxed in the same manner as sole proprietorships: LLC earnings and expenses are reported on Form 1040 Schedule C of members' personal income tax returns. If the income of your LLC for the year exceeds $400, you are required to file Schedule C with the Internal Revenue Service.

If a one-member LLC did not engage in any business activity and did not incur any business-related expenses, the member does not have to file Schedule C for the LLC to disclose its earnings. If the member received income from another business, he or she will still have to file a personal tax return, and if there was income from self-employment, he or she may have to file a Schedule C.

Your single-member LLC does not have to file Schedule C if it doesn't generate $400 or more in income. Even if there is less than the required amount of business activity, it is still a good idea to attach Schedule C whenever there is any business activity.

Filing Requirements for an LLC Partnerships

For LLCs which are taxed as partnerships, federal income tax filing requirements are the same as for other partnerships. In order to file an informational partnership tax return, LLCs must use tax Form 1065 unless they did not receive income and had no expenses to claim as deductions or credits. The LLC will also need to provide each member with a Schedule K-1, which lists the income, deductions, and credits that each partner will receive on behalf of the LLC based on their share.

Thus, the owner of an LLC that is taxed as a partnership but doesn't have any business activities is not required to file a partnership tax return unless the LLC wishes to claim any expenses or credits.

Filing Requirements For An LLC Treated As S or C Corporations

An often asked question is do I have to file LLC taxes if no income? When a corporation is taxed, a company's annual return must be filed, even if it is dormant. This includes filing corporate tax returns.

As soon as your LLC is registered, it's taxed either as a partnership or a sole proprietorship, depending on the number of owners, called members. Choosing C corporation taxation requires you to file Form 8832, or deciding whether to elect S corporation taxation requires you to file Form 2553.

Form 1120 is filed annually by C corporations. A C corporation is not a pass-through business, unlike all other options for LLC taxation. The C corporations pay a corporate tax of 21% before distributions of earnings are made to shareholders. As a result, dividends are taxed on the shareholders' personal income tax returns when they are made.

Form 1120-S must be filed by every S corporation every year, regardless of the company's activities. The income earned by S corporations is taxed only on the owners' personal returns, based on a pass-through taxation system.

In years when your LLC is inactive, you might be wondering what your business tax return looks like. It may seem strange, but you'll have to enter a lot of zeros. You can file an inactive LLC tax return using tax software.

Regardless of whether an LLC participated in any business during the year, it must file a federal income tax return if it has elected to be treated as a corporation for tax purposes.

Tax Return Due Dates

It is possible to pay LLC taxes in a number of ways. Since there are so many tax forms, there are several due dates.

For C corporation the 1120 Form is due on April 15. For S corporation the 1120 S and K-1 Forms are due March on 15. For Single-member LLC, Your Schedule C and Schedule SE are due by April 15. For Multi-member LLC Form 1065 and Schedule K-1 are due March 15. Schedule E and Schedule SE are due by April 15.

Ines Zemelman, EA
Founder of TFX