Reply To: LLC Taxation

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#2244
Kaye Thomas
Moderator

You’re correct to be concerned. This LLC is treated as a partnership, which is a flow-through entity, which means its income and deductions have to be reported on the returns of its members each year even if there are no cash distributions to the members.

The instructions for Form 1065 state:

[With exceptions not relevant here], every domestic partnership must file Form 1065, unless it neither receives income nor incurs any expenditures treated as deductions or credits for federal income tax purposes.

The fact that this entity had any income at all, even if “very limited,” is enough to require the filing of a return. And of course you would want to take advantage of whatever deductions are available. It would be highly advisable to have this return prepared by a professional familiar with partnership filings.