Filing taxes for your LLC, even if it has no income, might seem like a hassle, but it's an important step in keeping your business compliant and in good standing. Whether you're a new business owner just starting out or an experienced self-employed individual, knowing how to handle your tax responsibilities is essential. This guide will break down how to file taxes for an LLC with no income.

Table of contents

Key Takeaways:...Read more

My LLC made no income this year, do I have to file taxes?...Read more

Can an LLC deduct expenses without an income?...Read more

Will I get a tax refund if my LLC loses money?...Read more

How do I know when to file personal and LLC taxes together?...Read more

How to file taxes for an LLC that made no money...Read more

Key Takeaways:

LLC owners have to file taxes even if they didn't make an income.
LLC expenses can be deducted even without an income.
The LLC tax filing process will depend on the type of business structure.

My LLC made no income this year, do I have to file taxes?

First, what is an LLC? An LLC mixes parts of a corporation with a sole proprietorship or partnership. It gives its owners (members) limited liability and lets them report profits and losses on their personal tax returns. So what happens if you start an LLC and do nothing? When it comes to filing business taxes with no income, you do need to file even if you weren’t actively running your business or if you were just getting ready to start your business. If your business is up and running, you can deduct or amortize your start-up expenses. Even if your business didn't make any money but you were actively involved, it's still important to file and claim your expenses. Even if you haven’t made any income yet, it's important to file. You can report a loss on Schedule C (if you’re an independent contractor) to offset other income when filing taxes with no income. Remember to file your state taxes, too. Businesses register with the state, meaning you might need to file a state return even if you skip filing federally. Just check your state tax authority's website for details on state tax returns.

Can an LLC deduct expenses without an income?

An LLC can deduct expenses even without bringing in any income. This is a common scenario for new businesses that are still finding their footing. The IRS understands this and allows LLCs to deduct business expenses in the year they're incurred, even if there's no revenue yet. Let's say you started an LLC to launch your handmade jewelry business. In the first year, you spent money on supplies, marketing and setting up a website, but didn’t sell a single piece of jewelry. Since you were actively working on your business—buying supplies, attending craft fairs and promoting your brand, you will be able to deduct all those ordinary and necessary expenses like rent, utility bills and the costs of materials. These deductions will reduce your overall tax bill, even though your business didn’t make any money that year. The IRS also lets you deduct start-up and organizational costs. You can deduct up to $5,000 in start-up costs and $5,000 in organizational costs in the first year, with any remaining costs spread out over the next 15 years. Since you need to file taxes for your LLC with no income, make sure to keep detailed records of all your expenses.

Infographic entitled Common LLC Business Expenses showing deductions that can lower LLC taxes.

Will I get a tax refund if my LLC loses money?

If your LLC experiences financial losses, you might be wondering if you'll receive a tax refund. Let's break down how this works with an example. Imagine you own a small landscaping LLC. Last year, unexpected weather conditions led to a decrease in clients, resulting in a net loss for your business. Now, you're wondering how this loss will affect your taxes. If your LLC is a single-member or multi-member LLC taxed as a partnership, the losses can "pass through" to your personal tax return. Let's say your landscaping business incurred a $10,000 loss, but you had $5,000 of income from another job. In this case, you can deduct the $10,000 loss from your total income, potentially resulting in a tax refund for the portion of taxes paid on your other income. However, if your LLC is taxed as a corporation, such as a C corporation, the situation changes. C Corps can carry forward losses to offset future profits but cannot pass losses directly through to individual owners' tax returns. On the other hand, if your LLC is taxed as an S Corps status, losses can pass through to shareholders. Suppose you and your spouse are equal shareholders in the landscaping LLC. In this case, you could each potentially deduct $5,000 ($10,000 loss divided equally) from your personal income, possibly resulting in a tax refund if the losses exceed your basis in the company.

How do I know when to file personal and LLC taxes together?

If you're grappling with the decision of whether to file your business taxes separately from your personal tax return, there are several factors you should consider. Firstly, think about simplicity. Choosing pass-through taxation and bundling your business and personal taxes together can really simplify things. It's like getting two tasks done at once, just like how sole proprietorships and partnerships handle it. Secondly, think about the level of limited liability protection you want. While an LLC inherently offers liability protection, electing corporate taxation could potentially heighten this protection by segregating business liabilities from personal ones, just like a traditional corporation. Lastly, look at the tax rates associated with your chosen structure. Corporate tax rates may differ significantly from individual tax rates, and this can potentially impact your overall tax liability. Therefore, it's essential to weigh these rates carefully in your decision-making process.

How to file taxes for an LLC that made no money

When it comes to filing taxes for an LLC with no income, there are a few key steps to keep things smooth and maximize deductions. First off, you've got to understand how your LLC is classified for federal taxes. This affects what forms you'll use and what you'll need to report. Whether you're a sole owner, partnership or corporation, knowing this classification sets the stage for the rest of your tax journey.

Infographic entitled How To File Taxes For An LLC With No Income showing the process of filing LLC taxes.

Then, there's the matter of your Employer Identification Number (EIN). This number is like your business's social security number and is crucial for filing taxes and other business activities. You can get one online through the IRS website or by filling out Form SS-4 and sending it in via fax or mail. Making sure your EIN is up to date and linked correctly to your LLC is key for smooth sailing come tax time. Next up, picking the right LLC tax form. Depending on your LLC's structure, you'll use different forms to report your financial activities. Single-member LLCs usually use Schedule C and Form 1040, while multi-member LLCs file Form 1065. And if your LLC is taxed as an S or C corporation, you'll be filling out Form 1120-S or Form 1120, respectively. Now, even if your LLC didn't bring in any income, it's important to report your expenses accurately. This helps you maximize deductions and sets you up for tax benefits down the road when your business starts making money. Finally, when it's time to file your tax return, keeping detailed records of all your business expenses and transactions is a must. This helps you stay organized and ensures you're on the right side of the IRS. Plus, meeting those deadlines keeps everything running smoothly and keeps your LLC's financial management in check. FlyFin’s team of expert CPAs can answer questions like do I have to file taxes for my LLC if I didn't make money and provide unlimited tax support on the app. AI also scans your expenses to find all your LLC tax deductions, making sure you’re saving the most possible. The IRS won't penalize you for submitting a return for your inactive LLC, but they may ask why you didn't file one at all. So it's a good idea to file your business taxes, even if it's not mandatory, especially if your LLC had even one small business transaction during the year.

LLC tax loopholes

LLCs can use tax loopholes to lower taxable income and their tax bill. FlyFin offer expert CPA support to handle business taxes on the app.

How To File Taxes For An LLC With No Income