Does a new LLC mean a new tax return?

Forming an LLC doesn’t automatically add a tax return

Many new business owners assume that forming an LLC means filing a second, separate tax return every year. Whether it does depends on two things: who owns the LLC and how it’s taxed.

When it stays on your personal tax return

If you’re the only owner and you haven’t chosen a different tax treatment, the IRS usually doesn’t need a separate tax return. For federal income tax, it treats a one-owner LLC as if it isn’t there.

Your business income and expenses go on your personal tax return (Form 1040), on Schedule C for most businesses. That’s the same place they would go if you had never formed the LLC.

When a separate business tax return starts

A separate business tax return usually starts in one of two situations:

• The LLC has a second owner. An LLC with two or more owners is generally taxed as a partnership and files its own tax return (Form 1065).
• The LLC chooses to be taxed as an S corporation. Many people don’t realize an LLC can make this choice. Once it does, the LLC files its own tax return (Form 1120-S).

Before you add an owner or make an S corporation choice, know that either one brings a separate business tax return to file every year.

This covers your federal income tax return. Your state may have its own LLC filings or fees.

How we handle it

At Sansone CPA & Financial, we coordinate your tax, investment, and retirement decisions so the way your business is set up matches the way it’s taxed.