Posts

Tax Topics- LLC Tax filing

In our quest to de-mystify certain tax topics we will cover one of the stickier tax issues. The questions come in many forms- when should I file my LLC return? What tax form to use for a new LLC? What do I need to do now that I have registered my LLC with the state? LLC return due date?

Interestingly enough the answer to this question is, it depends. Mostly, it depends upon how your business is treated by the federal government, and that dictates things like, when and what type of return your business should file.

Background- What is an LLC?

An LLC also known as a Limited Liability Company, this business type exists from a State perspective, but not from a Federal perspective. For this reason, your LLC can choose to be recognized from a Federal tax perspective in a variety of different ways. However, most of these ways require a tax election. So, we will cover the automatic treatment(s) first.

Automatic treatment of an LLC

  • If the LLC has one owner:
    • Without any other work done, your business is treated from a federal return standpoint as a disregarded entity that will file its business reporting on form Schedule C (as an attachment on the business owner’s personal return).
    • Since most LLC’s are owned by one owner, this is far and away the most common type of LLC, in fact it is most likely the most common type of business.
    • Since most LLC’s have one owner, they are surprised to find out that they do not have different filing requirements than they had before they created the LLC. They also do not have a LLC return that is due, but a separate filing due as part of their personal return.
  • If the LLC has more than one owner:
    • Again, without any other work done, your business is treated from a federal return standpoint as a partnership that needs to file form 1065 annually. Partnership returns are due on or before March 15th annually.

Elective treatments available for an LLC

  • You can choose to be taxed as an S-Corporation for a year by making a timely election (one-time election). Timely elections are most commonly made either 2 months and fifteen days after forming, or no later than 2 months and fifteen days after the 1st of the year, to be treated as such as of January 1 of the filing year.
    • S Corporation elections are made by filing form 2553
    • All owners must sign this form
    • In most cases LLC’s cannot be owners of an S Corporation
    • Once you elect S Corporation status, you are treated as an S Corporation by the federal government for filing requirements for life, or until you make a different election at a later date
  • You can choose to be taxed as an C-Corporation for a year by making a timely election (one-time election). Timely elections are most commonly made either 2 months and fifteen days after forming, or no later than 2 months and fifteen days after the 1st of the year, to be treated as such as of January 1 of the filing year.
    • C Corporation elections are made by filing form 8832
    • An owner must sign this form on behalf of all owners. But may have to show that the owner was eligible to sign on behalf of all owners.
    • Once you elect C Corporation status, you are treated as a C Corporation by the federal government for filing requirements for life, or until you make a different election at a later date

We help many other individuals and businesses with LLC filings, tax elections, general tax compliance and advice. If you do not feel comfortable taking care of these filings, reach out to us at [email protected]

Anthony Momany, Managing Member, Capstone CPA Group PLLC