LLC Taxation

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  • #2241
    notmyjob
    Participant

    My husband is part of an LLC that was just formed in 2018. All of the administrative work is being done by one member, and I am concerned that he may be naive as to how this works. I asked this fellow if he would be filing taxes, and he said no, because no one will be taking money out of the company. While they had very limited income in 2018, there were startup costs, and I would assume that both would get reported in the year incurred.

    I know nothing about business taxes, and don’t really want to become the expert here. But I have read a little, and am wondering if a 1065 and K-1s need to be issued. I just want to make sure that they are handling this properly. Any advice would be welcome.

    Thanks

    #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.

    #2247
    notmyjob
    Participant

    Thank you so much, Kaye. I will convey this to the partners.

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