Do LLCs Have to File Tax Returns

Are Limited Liability Companies (LLCs) with No Income Required to File Tax Returns?

There are many reasons a business might not receive income. For example, if the business recently launched, the owner may still be in the process of finding clients or purchasing equipment. In other cases, no income is generated because the business is inactive, even if formal dissolution has not taken place. Whatever the reason may be, it’s important for business owners to understand their tax filing requirements, which differ depending on how the business is structured. Do LLCs Have to File Tax Returns if there is no income? If you’re a small business owner in California, and your company had no income this year, continue reading to learn whether you are required to file a tax return. Then, contact our Sacramento tax accountants for assistance with all of your bookkeeping, business planning, and tax preparation needs.

For income reporting purposes, there are three basic ways a limited liability company may be categorized:

  1. LLC Corporations
  2. LLC Partnerships
  3. Single-Member LLCs (Disregarded Entities)

LLC Corporations
LLCs and corporations are distinct business structures. However, an LLC may elect to be taxed as a corporation. (Alternately, LLCs may elect to be taxed as partnerships.)

It is mandatory for all corporations to file annual tax returns, even if the business was inactive or did not receive income. An LLC that chooses to be treated as a C corporation for tax purposes is required to file Form 1120 (U.S. Corporation Income Tax Return). If the LLC elects to be treated as an S corporation, Form 1120S (U.S. Income Tax Return for an S Corporation) should be filed instead. Taxpayers who file Form 1120S use Schedule K-1 (Shareholder’s Share of Income, Deductions, Credits, etc.) to report credits, deductions, and corporate income.