How to File Taxes for an LLC With No Income

Depending on your LLC tax structure, you might be required to file your business taxes in years of no activity. You should always plan to file an LLC tax return even when it’s not required.

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After you hit the “pause” button on your business, it might seem counterintuitive to file a business tax return. It’s not required in every case, but you should expect to file your LLC taxes every year that your business exists, even if you have little to no business activity.

Do I have to file taxes for an LLC with no income?

You must always file your LLC taxes when you have business activity: revenues, deductions, and credits. Absent any business activity, you might be able to skip filing your federal LLC tax return, but remember to file your personal tax return when you earn income.

Whether you’re legally required to file business taxes with no income depends on how your LLC is taxed. LLCs have the unique ability to be taxed in many ways, and each taxation status has a set of rules for business tax filings.

Don’t forget about state tax filings. Businesses are registered at the state level, so you might be required to file a state return while being exempt from federal filing. Check your state tax authority website for state tax return information.

No matter your LLC tax classification, operating at a loss or with no income doesn’t preclude you from filing your tax return. It’s important — and the law — to file taxes for an LLC with expenses and no income. LLCs with no income but deductible expenses can offset personal income or future business income through the net operating loss deduction.

If deductions and credits neutralize your revenues — meaning you reached your company’s break-even point — you must still report the activity through an LLC tax return.

Bottom line: You need to file your LLC taxes when your business brings in money — either through revenue or a loan — or when it is eligible for a deduction or tax credit. By filing annual business returns, you’re making sure the IRS doesn’t ding you for a failure to file. You also run the risk of appearing like your business is just a hobby when you don’t consistently file a return.

When you treat your business like a hobby, the IRS will do the same. Filing your annual small business taxes, income or not, is one step to prove that you don’t treat your business as a hobby and that you’re seeking to profit each year. The IRS has a nine-point guideline on the difference between a hobby and a business.

Filing requirements for sole proprietors, partnerships, and corporations

You don’t always have to file a federal return for an LLC with no business activity. But check with your state tax authority about filing state taxes for your LLC. Find your business taxation status below to explore your LLC filing requirements.

Requirements for LLCs treated as sole proprietorships

LLCs taxed as sole proprietorships don’t have to file an annual federal business tax return in years of no business activity. Only single-member LLCs — LLCs with one owner — can be taxed as sole proprietorships.

Single-member LLCs are pass-through entities that report business activity on the owner’s personal return. Unlike C corporations, pass-through entities aren’t subject to a uniform small business tax rate. Pass-through businesses are taxed at their owners’ individual tax rates.

Your single-member LLC files Form 1040 Schedule C to detail business revenue, deductions, and credits to the IRS. Since LLCs taxed as sole proprietorships don’t file a separate business tax return, they’re called “disregarded entities,” which are inseparable from their owners for tax purposes.

You don’t have to file Schedule C for your single-member LLC when your company brings in less than $400 for the year. I still recommend attaching Schedule C whenever there is any business activity, though, even if it’s less than the required amount.

Requirements for LLCs treated as partnerships

You don’t have to file a federal business return when there’s no business activity in your inactive LLC taxed as a partnership.

LLCs treated as partnerships report their business activity on Form 1065. As a pass-through entity, partnerships pay taxes through each owner’s personal return, not at the company level.

Still, an LLC taxed as a partnership files information return Form 1065 to relay earnings, deductible business expenses, and credits to the IRS. Since partnerships file information returns, they’re not considered disregarded entities like businesses taxed as sole proprietorships.

Requirements for LLCs treated as S or C corporations

When taxed as a corporation, your business must file an annual return, even when the company lies dormant.

When you first register your LLC, you’re automatically taxed as either a sole proprietorship or a partnership, depending on the number of owners, who are called members. You may elect S corporation taxation by filing Form 2553, or you can choose C corporation taxation by filing Form 8832.

C corporations file Form 1120 annually. C corporations are not pass-through businesses, unlike all other taxation options for LLCs. As separate taxpayers, C corps pay a 21% corporate tax before distributing earnings through dividends. Shareholders are taxed on dividends on their personal returns.

S corporations must file information return Form 1120-S each year, regardless of business activity. S corps maintain pass-through taxation, where business income is taxed solely on owners’ personal returns.

You might wonder what a business tax return looks like in years when your LLC is inactive. While it might feel weird, you’ll be writing in a lot of zeroes. Tax software can walk you through filing your inactive LLC tax return.

When in doubt, file an LLC return

Look at it this way: The IRS can’t penalize you for filing a return for your inactive LLC, but it can inquire about why you didn’t file a return at all. If you have even one small business transaction during the year, it’s best to file your business taxes, even when it’s not required.

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