How to File Taxes for a Partnership LLC? (2024 Guide)

Atty. Danya Shakfeh
Published by Atty. Danya Shakfeh | Author
Last updated: February 24, 2024
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When you form a multi-member limited liability company, your business can either be taxed as a partnership or a corporation. If you opted for a partnership tax status, then you'll need to file the required forms with the Internal Revenue Service (IRS).

As a corporate attorney with over a decade of experience, I assisted several businesses and entrepreneurs with forming and maintaining a company.

I consulted our team of tax professionals to help you understand the process of filing taxes for an LLC with partnership status.

Quick Summary:

  • To file taxes as an LLC partnership, you need to accomplish and submit IRS Form 1065, Schedule K-1, and Form 1040.
  • Form 1065 reports the finances of the business, Schedule K-1 reflects the income and losses of each partner, and is filed on their respective individual income tax return, Form 1040.
  • The penalty for failure to file is 5% of the unpaid taxes for each month, but capped at 25%.
  • When filing taxes for a business, I ensure that all information are complete and accurate to avoid complications which may lead to penalties.


Filing Taxes for a Partnership LLC

The Internal Revenue Service considers multi-member LLCs to be taxed as a partnership. To file your taxes, you must submit the following forms:

1. Form 1065: U.S. Return of Partnership Income

Form 1065 is an IRS document used to declare the profits, losses, deductions, and credits of a business partnership, for tax filing purposes. It provides a report of the business entity's financial status for the year [1].

The LLC partnership must file a single IRS Form 1065 to declare its finances for the past year, but the business does not pay the income tax.

The form must be submitted through online tax filing services or by mail, by March 15 of each year. We were able to download the document on the IRS website.

You need to include the following information when completing Form 1065:

  • Net income and revenues
  • Deductible expenses
  • Balance sheet

It must also include:

  • EIN
  • Number of partners
  • Start or inception of the business
  • Percentage ownership of each partner

2. Schedule K-1: Partner's Share of Income, Deductions, Credits

In addition to Form 1065, each partner must prepare and submit a Schedule K-1 to report earnings, losses, deductions, and credits on the partnership.

The partners must report and pay taxes based on their shares of income on their individual tax returns, whether it is distributed or not.

I remind clients that the K-1 form does not need to be included with the actual tax returns, only the financial information needs to be transferred to IRS Form 1040.

I like to pay taxes. With them, I buy civilization. - Oliver Wendell Holmes Jr., Former Chief Justice of the Massachussetts Supreme Judicial Court

3. IRS Form 1040: U.S. Individual Income Tax Return

IRS Form 1040 is the standard form that individual taxpayers use to file their annual income tax returns.

The form is available on the IRS website and has to be submitted electronically or by mail on April 15 of each year.

Form 1040 has to include the following information:

  • Filing status
  • Name Address 
  • SSN
  • Number of dependents

The income section requires the following information:

  • Wages
  • Salary 
  • Capital gains 
  • Pensions
  • Social security benefits
  • Other types of income 

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Distributive Share Taxes

If your multi-member LLC is taxed as a partnership, each member of the LLC will receive a distributive share, which is money or property that each partner receives from the company’s profits and losses.

These distributive shares are included in each member's personal income tax return and must be reported to the IRS.

LLC Employee Taxes

Writing on a document file

If you have employees, your multi-member LLC will have to pay federal income taxes on wages paid to those employees.

When it comes to paying federal employment taxes, an LLC is the same as any other business structure—you'll need to withhold money from your employees' wages for social security and medicare.

FICA Taxes

Two types of taxes levied by employers and employees under the Federal Insurance Contributions Act (FICA) are the Social Security tax and the Medicare tax.

Employers must match their employees' FICA tax payments. As a result, each pays one-half of the overall FICA rate.

FAQs

Why Would an LLC Elect to Be Taxed as a Partnership?

An LLC elects to be taxed as a partnership to avoid double taxation and maintain the company as a pass-through entity.

Can You Change a Partnership LLC to a Single-Member Limited Liability Company?

You can change a partnership LLC to a single-member limited liability company by filing IRS Form 8832 with the Internal Revenue Service. As with all legal filings, there will be an associated fee for this service.

Filing Taxes for a Partnership LLC: Conclusion

To conclude, a multi-member LLC taxed as a partnership must file an IRS Form 1065 to report the company's business income and expenses.

In addition, you must pay employment taxes on wages paid to employees of your business.  LLC employees may include the company's owner if they choose not to be treated as sole proprietors.

Lastly, you must pay a self-employment tax on any wages paid to the owner of a disregarded entity.

References:

  1. https://www.irs.gov/businesses/small-businesses-self-employed/llc-filing-as-a-corporation-or-partnership

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