How to File Federal Income Taxes for an LLC
Learn how an LLC's tax classification, whether by default or election, determines the correct federal tax forms, procedures, and key filing deadlines.
A Limited Liability Company (LLC) is a business structure created by state law, but the Internal Revenue Service (IRS) does not have a dedicated tax classification for it. For federal tax purposes, the IRS treats an LLC as either a sole proprietorship or a partnership, depending on its number of owners, called members. LLC members can also elect to have the company taxed as a corporation, either a C corporation or an S corporation. An LLC’s tax filing process depends on this classification.
Understanding LLC Federal Tax Classifications
The IRS automatically classifies an LLC based on its number of members. A single-member LLC is a “disregarded entity,” meaning its income and expenses are reported on the owner’s personal tax return, similar to a sole proprietorship. This is a form of pass-through taxation, where the business itself does not pay federal income tax; the owner pays personal income tax on the business’s net income.
An LLC with two or more members defaults to a partnership classification. Like a disregarded entity, a partnership is a pass-through entity where profits and losses are reported on the members’ personal tax returns. However, the partnership itself must also file an annual informational tax return with the IRS.
An LLC can elect to be taxed as a corporation. As a C corporation, the LLC is a separate taxpayer that files its own return and pays corporate income tax. If the corporation distributes dividends to members, those dividends are taxed again on the members’ personal returns, creating double taxation.
As an S corporation, an LLC functions as a pass-through entity, similar to a partnership. The S corporation files an informational tax return, and shareholders report their share of the income on their personal tax returns. This election can sometimes offer advantages regarding self-employment taxes.
Required Information and Forms for Filing
The forms required to file federal income taxes for an LLC depend on its tax classification. For a single-member LLC classified as a disregarded entity, the owner uses Form 1040, U.S. Individual Income Tax Return, and attaches Schedule C, Profit or Loss from Business. Schedule C is used to report the LLC’s gross receipts, cost of goods sold, and business expenses.
A multi-member LLC taxed as a partnership must file Form 1065, U.S. Return of Partnership Income. This form reports the LLC’s income and deductions. The LLC must also prepare a Schedule K-1 for each partner, which details their share of the partnership’s financial items. Partners use their Schedule K-1 to complete their individual Form 1040.
If an LLC elects to be taxed as an S corporation, it must file Form 1120-S, U.S. Income Tax Return for an S Corporation. To make this election, the LLC must first file Form 2553, Election by a Small Business Corporation. Similar to a partnership, an S corporation provides a Schedule K-1 to each shareholder, who uses this information to file their personal tax returns.
For an LLC choosing to be taxed as a C corporation, the required form is Form 1120, U.S. Corporation Income Tax Return. This form is used to calculate and report the corporation’s tax liability. To elect this status, an LLC must file Form 8832, Entity Classification Election.
The Filing Process and Key Deadlines
Once completed, tax forms must be submitted to the IRS. LLCs can file their tax returns electronically using IRS-authorized software or by mail. Electronic filing is faster and more secure.
The filing deadlines for businesses using a calendar year depend on the LLC’s tax classification. The deadline for partnerships and S corporations to file Form 1065 or Form 1120-S is March 15. The deadline for C corporations filing Form 1120 and for single-member LLCs filing a Schedule C is April 15. If a due date falls on a weekend or legal holiday, the deadline moves to the next business day.
If an LLC needs more time to file, it can request an automatic six-month extension. Partnerships and S corporations file Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns. A single-member LLC owner files Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. An extension to file is not an extension to pay any taxes owed.
State and Other Tax Obligations
In addition to federal income taxes, LLCs have state and local tax obligations. These can include state income tax, franchise tax, or an annual report fee. The requirements vary widely by state, so owners should check with their state’s department of revenue for specific obligations.
Members of LLCs taxed as disregarded entities or partnerships are subject to self-employment tax, which covers Social Security and Medicare taxes. This tax is calculated on the net earnings from self-employment and reported on Schedule SE, filed with the owner’s Form 1040.
Owners of pass-through entities, including disregarded entities, partnerships, and S corporations, are required to pay estimated taxes throughout the year. These quarterly payments are made using Form 1040-ES, Estimated Tax for Individuals. This process ensures that income and self-employment taxes are paid as income is earned.