What Tax Form Does an LLC File? (Everything You Should Know)
If you own a limited liability company (LLC), you have probably wondered what IRS tax forms your business should file each year.
That will depend on the tax classification of a limited liability company elected upon registration with the state authority.
As a corporate attorney specializing in LLCs, I've gained over a decade of practice addressing clients' concerns on LLC formation, organization, and taxation.
After in-depth research and collaboration with our panel of legal professionals, we'll provide you with all pertinent information regarding which tax forms to file based on the structure and tax classification of your business entity.
Quick Summary:
- The tax form an LLC files is based on the business structure and the number of members the company has. LLCs taxed as sole proprietors fill out Schedule C (Form 1040), partnerships file Schedule K-1 and Form 1040, and corporations submit Form 1120.
- By default, limited liability companies are taxed as a sole proprietorship or a partnership but may opt to be classified as an S Corp or C Corp.
- Net earnings of LLC members pass through to its owners and are reflected on their personal returns, which are subject to 15.3% self-employment tax, according to the Internal Revenue Service (IRS).
- Before I file my personal tax returns, I make sure I use the right form and provide the correct information to avoid delays or penalties.
What tax form does an LLC file?
The tax forms an LLC files will be based on the specific structure of the company. An LLC will file a tax form according to how it is classified – as a sole proprietorship, multi-member, or corporation.
Here are the specific business structures and the tax form they need to file:
1. LLCs Taxed as a Sole Proprietorship
A single-member LLC taxed as a sole proprietorship is a business structure where a person has no separate legal existence from their business.
A sole proprietor has taxes withheld from their paychecks and pays estimated quarterly taxes, using Schedule C (Form 1040).
Because single-member LLCs taxed as a sole proprietorship are required to file Schedule C, clients of mine were eligible to benefit from pass-through taxation and take advantage of deductions that can help lower their taxable income.
2. LLCs Taxed as Partnerships
Multi-member LLCs have two or more owners, and they represent a limited liability company that is treated as a partnership by the Internal Revenue Service.
Members of a multi-member LLC are treated as partners for federal income tax purposes, and they report their share of the LLC's income or loss on Schedule E, Supplemental Income, and Loss.
Each member of the limited liability company reports their share of the business income or loss on their personal tax returns.
Partnerships file an information return to disclose their income, gains, losses, deductions, and credits using Form 1065.
A partnership does not pay tax on its company income but "passes through" any profits or losses to its members. The members will report any income on their personal returns using Schedule K-1.
"Paying tax is not a punishment. It's a responsibility."
- Chris Matthews, American Political Commentator, Former Talk Show Host & Author
Read more: What is the Difference Between LLC and Sole Proprietorship
3. LLCs Taxed as Corporations
If the LLC is taxed as a corporation, it should file a form 1120 (US Corporation Income Tax Return). Since pass-through taxation is not applied, I did not file tax forms 1040 or 1040-SR.
However, if an LLC opts to be taxed as an S-corporation, the company should file form 1120-S and the members must each fill out their own schedule K-1 form [1].
An LLC can choose to be treated as a C corporation or an S Corp. This choice will dictate the corporate filing requirements.
A C corporation files business taxes and is responsible for taxes on its income, whether it takes the form of dividends or capital gains when the company's shares are sold.
An S Corp does not pay business taxes; they pass through their retained earnings to be taxed as personal income.
The shareholders report income and losses on their personal tax returns. I always inform clients that limited liability companies have to fulfill certain requirements to be taxed as S corporations, such as having only one class of stock and no more than 100 shareholders. In case they do, they file form 2553.
LLCs taxed as corporations are required to file Form 8832 with the IRS to elect corporate taxation status [2]. According to the Internal Revenue Service (IRS), as of 2021, there were over 1.7 million business entities classified as corporations in the United States.
Related Articles:
Self-Employment Taxes
Self-employment tax is the tax you pay on self-employment income.
You may need to make estimated quarterly payments of your self-employment tax if you are operating a business or practice as an independent contractor, sole proprietor, member of a partnership.
An LLC that elects to be taxed as a C corp must pay income taxes on its business earnings, and then again, on the personal returns of each shareholder. Hence, clients of mine were subjected to double taxation.
When you work for a company, you need to pay social security and insurance taxes, half of which is withheld from your income, and part is paid for by your employer. If you pay self-employment taxes, you are responsible for the full amount.
You can file self-employment tax using Schedule SE (Form 1040) with the IRS.
FAQs
Do LLCs Pay Taxes Monthly?
LLCs do not pay taxes monthly. However, members can opt to remit taxes quarterly or pay annually.
How Many Times Are LLCs Taxed?
LLCs are taxed once annually. However, there are some cases when LLCs may be taxed more than once in a single year.
Do You Get a Tax Refund if Your LLC Loses Money?
You get a tax refund if your LLC loses money only if the entity is classified as a multi-member LLC and taxed as an S-corporation. If you have sufficient ownership interest, you can claim a company loss on your personal return.
References:
- https://www.irs.gov/businesses/small-businesses-self-employed/llc-filing-as-a-corporation-or-partnership
- https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc
