What Key Tax Forms Does an LLC File?
Learn which tax forms your LLC needs to file for federal, state, and local compliance, depending on its structure and operations.
A Limited Liability Company (LLC) offers owners personal asset protection from business debts and legal claims, similar to a corporation. Its adaptability, especially in how it can be taxed by the IRS, is a key advantage. Understanding these tax implications is important for LLC owners to ensure compliance with federal, state, and local tax regulations.
How LLCs are Taxed
An LLC’s tax filing requirements depend on its elected tax classification with the IRS. An LLC can be treated as a pass-through entity, where profits and losses are reported on the owner’s personal tax return, or as a separate taxable entity. This choice directly influences the federal income tax forms an LLC will file.
By default, the IRS classifies a single-member LLC as a disregarded entity, taxed like a sole proprietorship. Its income and expenses are reported on the owner’s individual tax return. A multi-member LLC is automatically classified and taxed as a partnership. This requires the LLC to file an informational return, with profits and losses passed through to the individual owners.
LLCs can also elect corporate tax treatment. An LLC can elect to be taxed as an S corporation by filing Form 2553. This allows for pass-through taxation similar to a partnership, with specific rules for owner compensation and distributions. An LLC can also elect to be taxed as a C corporation by filing Form 8832. This treats the LLC as a separate taxable entity, subject to corporate income tax rates.
Federal Income Tax Forms
The federal income tax forms an LLC files depend on its tax classification with the IRS. Each classification has a distinct set of forms for reporting profits, losses, and other financial details.
For a single-member LLC, taxed as a disregarded entity, the owner reports business income and expenses on their personal income tax return, Form 1040. This is done using Schedule C, which details the business’s revenues and deductible expenses.
A multi-member LLC, defaulting to partnership taxation, files Form 1065. This informational return reports the partnership’s income, deductions, gains, losses, and other financial items. Form 1065 generates Schedule K-1s for each partner, reporting their share of income or loss. Partners use these Schedule K-1s on their personal Form 1040.
If an LLC elects S corporation taxation, it files Form 1120-S. This informational return reports the S corporation’s income, losses, deductions, and credits. Profits and losses pass through to shareholders, who report them on their personal income tax returns, guided by Schedule K-1.
For an LLC that elects C corporation status, the business files Form 1120. This form reports the corporation’s income, gains, losses, deductions, and credits, and calculates its federal income tax liability. Unlike pass-through entities, a C corporation pays tax directly on its profits.
Other Federal Tax Forms
Beyond primary income tax forms, LLCs may need to file other federal tax forms depending on their operations and whether they have employees. These forms address various tax obligations separate from the business’s income tax classification.
Most LLCs, especially those with employees or electing corporate status, must obtain an Employer Identification Number (EIN). An EIN is a unique nine-digit federal tax identification number for the business. To apply for an EIN, an LLC files Form SS-4.
If an LLC has employees, it is responsible for withholding and paying federal payroll taxes, including federal income, Social Security, and Medicare taxes. Employers report these withheld taxes and matching contributions quarterly using Form 941. Employers also file Form 940 annually to report and pay federal unemployment taxes.
Certain LLCs in specific industries or dealing with particular goods and services may be subject to federal excise taxes. These taxes apply to specific products, services, or activities. If applicable, these LLCs file Form 720 to report and pay these taxes.
State and Local Tax Forms
In addition to federal tax obligations, LLCs are subject to state and local tax requirements, which vary significantly by location and activities. States often have their own income tax systems for businesses.
Many states require LLCs to file state-specific income tax returns. Some states impose annual franchise taxes or fees on LLCs for the privilege of doing business. These fees can range from a nominal amount to a sum based on factors like revenue or capitalization.
If an LLC sells taxable goods or services, it must collect and remit state and local sales tax. This involves obtaining a sales tax permit and regularly filing sales tax returns. LLCs that own real estate or business personal property may be subject to local property taxes. These taxes are levied annually based on the assessed value of the property.
Cities and counties may also impose business licenses, gross receipts taxes, or other local levies on LLCs. Due to the variance in state and local tax laws, LLC owners should consult their state’s Department of Revenue and local tax authorities for compliance.