How to File Taxes for an LLC with No Income

Sometimes a limited liability company (LLC) has a year with no business activity. For example, a newly formed LLC might not have started doing business yet, or an older LLC might have become inactive without being formally dissolved.

However, even if an inactive LLC has no income or expenses for a year, it might still be required to file a federal income tax return. 

Do I need to file a tax return for an LLC with no income?

LLC tax filing requirements depend on how the LLC is taxed. An LLC may be disregarded as an entity for tax purposes, or it may be taxed as a partnership or a corporation. Even if your LLC has no income, you may be legally required to file taxes.

There are other reasons besides legal compliance that you may want to file a tax return for an LLC with no income.

For instance, you might consider filing a tax return for an LLC with no income if you want to do any of the following:

• Preserve the LLC status.
• Avoid penalties and interest charges.
• Qualify for tax credits or a tax refund.
• Show the IRS that you are treating your LLC as a business as opposed to a hobby.

How to file taxes for an LLC with no income

If your LLC has no income, follow these steps to file your business taxes. 

Step 1: Confirm your LLC’s tax classification

The first step in filing taxes for an LLC with no income is verifying your LLC’s tax classification. By default, a single-member LLC is considered a disregarded entity, and an LLC with two or more members is treated as a partnership. To be classified as a corporation, you would have to have filed Form 8832; to be classified as an S corporation, you would need to have filed Form 2553. 

Step 2: Obtain your LLC’s employer identification number (EIN)

An EIN (or federal tax identification number) serves to identify business entities for tax purposes. An LLC that meets IRS requirements (such as having employees or operating as a corporation or partnership) needs to have an EIN to file federal taxes. 

If you have lost or misplaced your EIN, you can find it through any of the following means:

• On the IRS’ confirmation notice
• Via any bank or agency you used the EIN to open an account with 
• On a previously filed tax return 
• By calling the IRS (1-800-829-4933)

If you don’t yet have an EIN, the IRS provides a free online service to apply for an EIN. You will need to check with your state to see if you need a state number or charter. 

You can also get an EIN using LegalZoom’s EIN service. We guarantee accurate filing—fill out a quick questionnaire and we will get back with a confirmed EIN for your business. 

Step 3: Determine what tax form is required

The specific tax forms that you will need depend on how your LLC is classified.

Disregarded entities (single-member LLCs) need Form 1040 to report annual income and Schedule C to report profit and loss information. 

Multiple-member LLCs (partnerships) need Form 1065, LLCs filing as C corporations need Form 1120, and LLCs classified as S corporations need Form 1120-S to report income, gains, losses, deductions, and credits.

When filing taxes you should check the IRS website for any updated requirements and make sure you file on time. 

Step 4: Report your LLC’s income and expenses

If your LLC has no income, you’ll need to report your income as zero and list any business expenses. Keep in mind that your LLC may be eligible for deductions. 

Step 5: File your LLC’s tax return

The typical deadline for filing your LLC’s tax return depends on the type of form you are filing.

Here are the deadlines for filing the following forms:

• Form 1040 is due April 15
• Form 1065 is due March 15 (or the 15th day of the third month after the end of the LLC’s tax year)
• Form 1120 is typically due on the 15th day of the fourth month after the end of the company’s fiscal year
• Form 1120-S is due March 15 (or the 15th day of the third month following the end of the company’s fiscal year)

If you miss your LLC’s tax filing deadline, you risk incurring interest or having to pay penalties. 

Tax elections for LLCs

If an LLC has only one owner (known as a member), it is not treated as separate from its owner unless the LLC files Form 8832 and opts to be treated as a corporation for federal income tax purposes. 

If a single-member LLC doesn’t elect to be treated as a corporation, the owner reports the LLC’s income and expenses on their personal federal income tax return. Keep in mind that a single-member LLC is considered a separate entity for employment tax and certain excise tax purposes.

If an LLC has two or more members, the IRS automatically treats it as a partnership. The LLC files an informational partnership tax return and the members also report the LLC’s income and expenses on their personal tax returns. 

How to change your LLC’s tax classification

By default, an LLC with one member is classified as a disregarded entity, and an LLC with two or more members is classified as a partnership. An LLC can change these default classifications and choose to be taxed as a corporation. The LLC may make this election when it is formed, or it may elect to change its tax classification at a later date. 

If you want your LLC to be taxed as a corporation, you can choose C corporation taxation by filing Form 8832, Entity Classification Election with the IRS. Form 8832 enables an LLC to change its default federal tax classification to a corporation. 

If your LLC meets the IRS’ election criteria, you can also choose S corporation taxation by filing Form 2553, Election by a Small Business Corporation. 

You do not have to file Form 8832 before filing Form 2553. An LLC that has filed Form 2553 is considered to have elected classification as a corporation in addition to the S corporation classification.

There are several reasons why an LLC may want to change its tax classification, including the following:

• Financial situation or goals change. An LLC that is looking for investors may want to file as a C corporation, as it may have more success gaining financial backing if it is incorporated.  
• Asset protection. Incorporation provides a higher level of personal liability protection for business owners. 
• Business growth. Incorporating an LLC can help the business maintain stability if there are shifts in ownership.

Tax filing requirements by business structure

Tax filing requirements differ depending on how your LLC is structured. Here are the filing requirements for single-member LLCs, LLC partnerships, and LLC corporations.

Filing requirements for single-member LLCs

A single-member LLC is considered a pass-through entity. Pass-through entities are business entities that enable profits to pass through the business owner(s). Pass-through entities aren’t subject to a small business tax rate because the business owner reports the entity’s income on their individual income tax return, meaning the income is taxed at the individual tax rate.

A single-member LLC is regarded as a sole proprietorship or disregarded entity for tax purposes.

An LLC that is not considered a separate entity for federal income tax purposes is taxed in the same way as a sole proprietor: The LLC’s income and expenses are reported as self-employment income on Schedule C of the member’s personal tax return. You are required to file Schedule C if your LLC’s income exceeds $400 for the year.

If a one-member LLC does not have any business activity and does not have any expenses to deduct, the member does not have to file Schedule C to report the LLC’s income. However, the member will still have to file a personal tax return if he or she had other income, and may have to file a Schedule C if there was self-employment income from another business.

It’s recommended that single-member LLCs with no income still file Form 1040 Schedule C, Profit or Loss from Business to report business deductions and credits to the IRS. 

Filing requirements for an LLC partnership

An LLC that is taxed as a partnership is subject to the same federal income tax return filing requirements as any other partnership. An LLC partnership is considered a pass-through entity and must file an informational partnership tax return on Form 1065 unless it did not receive any income during the year AND did not have any expenses that it will claim as deductions or credits.

Thus, an LLC with no business activity that is taxed as a partnership is not required to file a partnership tax return unless there are expenses or credits that the LLC wants to claim.

LLC tax filing requirements for an LLC corporation

Corporations have different tax filing requirements than either disregarded entities or partnerships. All corporations are required to file a corporate tax return, even if they do not have any income.

If an LLC has elected to be treated as a corporation for tax purposes, it must file a federal income tax return even if the LLC did not engage in any business during the year.

Even if your LLC has no business activity, it is important to understand your LLC tax filing status and whether it is obligated to file a federal income tax return. Filing required returns on time can help your LLC avoid fines and penalties.

C corporations must file Form 1120, U.S. Corporation Income Tax Return annually. Corporations can determine their tax rate by multiplying their taxable income by 21%.

C corporations are not considered pass-through entities. A C corporation is considered separate from its owners and must pay income tax on its profits. A C corporation may be subject to double taxation, which means it pays taxes on its profits and when dividends are paid to its shareholders. Shareholders can’t deduct any corporate losses. 

S corporations are typically considered pass-through entities (as long as no exceptions apply) and must file the information return Form 1120-S, U.S. Income Tax Return for an S Corporation annually. 

An S corporation passes its income, losses, deductions, and credits to its shareholders for federal tax purposes. The shareholders then report the income and losses on their personal tax returns. This process enables an S corporation to avoid double taxation on its income, although it is still subject to entity-level tax on specific built-in gains and passive income. 

Other potential tax implications

Here are some additional LLC tax considerations to be aware of.

State taxes

Some businesses may be required to file state taxes. You can find out if your LLC needs to pay state taxes by visiting your state’s tax authority website.

Self-employment taxes

Owners of disregarded entities (single-member LLCs) need to pay self-employment tax (SE tax). SE tax consists of Social Security and Medicare taxes. Employers typically calculate Social Security and Medicare taxes for their employees, but self-employed individuals (including single-member LLCs and many members of LLC partnerships) are required to calculate their own SE tax. 

The current SE tax rate is 15.3%, which includes 12.4% that goes to Social Security and 2.9% for Medicare.

If your LLC makes more than $400 annually, you should use Schedule SE, Self-Employment Tax to determine your SE tax.

Tax deductions and credits

A tax deduction is an amount of your income that you don’t have to pay tax on. You subtract tax deductions from your income, which lowers your taxable income. 

For example, let’s say your taxable income is $100,000 and you have a tax deduction of  $10,000 for business expenses. You would subtract the tax deduction from your income, and would only need to pay taxes on $90,000. 

A tax credit can be subtracted from the amount of tax you owe. A tax credit can either decrease your tax payment or increase your tax refund. Even if you don’t owe any taxes, you may still be able to get money back for certain refundable credits.  

Strategies for simplifying future taxes 

Here are a few strategies that can help you simplify future taxes:

• Choose the right business structure
• Maintain precise records
• Keep your personal finances and business finances separate
• Take advantage of applicable tax credits and deductions
• Stay informed about tax legislation developments
• Schedule estimated tax payments in advance (if applicable)
• Use an online accounting solution, such as LZ Books

How LegalZoom can help you start an LLC

LegalZoom has helped entrepreneurs turn ideas into businesses over 2 million times. Our LLC formation services include step-by-step guidance and assistance from experienced professionals who can help you launch, grow, and protect your business. 

Here’s how to get your LLC started in three simple steps:

1. Tell us about your business.
2. Choose the services you need.
3. Sit back and relax while we take care of the rest.

FAQs 

How does an LLC affect my personal taxes?

How an LLC affects your personal taxes depends on how it is classified. Single-member and multiple-member LLCs are considered pass-through entities, which means that profits and losses from business income are passed through to the members and must be reported on their personal income tax returns. 

How much can an LLC write off?

The amount an LLC writes off depends on factors such as its classification and what kind of business expenses it has. 

An LLC can typically write off the following types of expenses:

• Advertising expenses
• Business expenses
• Home office expenses
• Insurance premiums (related to your business)
• Travel expenses

The IRS requires any business expenses an LLC writes off to be ordinary, necessary, reasonable in amount, and directly related to the business’s activities. You should keep accurate records of your business expenses to justify your deductions.

How much should an LLC put away for taxes?

The amount an LLC should put away for taxes depends on factors such as its tax classification, income and expenses, and state tax. The general rule of thumb is to put aside 25% to 30% of your business income for taxes. 

What if I miss the filing deadline?

If you miss the filing deadline, you may be subject to penalties and interest accrual, and you may miss out on any refunds you are owed. 

Jane Haskins, Esq., contributed to this article.