How to File Taxes for a Partnership LLC? (2025 Guide)
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 while Schedule K-1 reflects the income and losses of each partner and is filed on their respective individual income tax return, Form 1040.
- According to the IRS, in 2020, there were 4,280,690 million partnerships in the U.S., with limited partnerships making up 10.5% yet controlling 34.9% of partners and 28% of profits, highlighting the importance of tax compliance.
- When filing taxes for a business, I ensure that all information is complete and accurate to avoid complications that may lead to penalties.
Filing Taxes for a Partnership LLC
In 2020, the U.S. experienced significant growth in business partnerships, reaching a total of 4,280,690 million—a 12% increase from the previous year.
Within this context, limited partnerships were particularly notable, representing only 10.5% of total partnerships but accounting for 28% of the profits and holding the largest share of partners at 34.9% [1].
Moreover, the Internal Revenue Service categorizes multi-member LLCs as partnerships for tax purposes, further emphasizing the diversity and complexity within this segment of the business landscape.
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 [2].
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
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
Under the Federal Insurance Contributions Act (FICA), both employers and employees contribute equally to Social Security and Medicare taxes.
In 2023, each pays 6.2% for Social Security up to \$160,200 of the employee's wages, and 1.45% for Medicare on all earnings, with no cap.
Additionally, employees earning over \$200,000 are subject to an extra 0.9% Medicare tax on the excess.
Employers are responsible for withholding these taxes from employee wages.
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.
References:
- https://www.irs.gov/pub/irs-soi/soi-a-copa-id2204.pdf
- https://www.irs.gov/businesses/small-businesses-self-employed/llc-filing-as-a-corporation-or-partnership
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