LLC Tax Question
I have formed an LLC but currently have no properties in it. Basically the LLC had no activity for 2004. How would I file taxes for this entity? What form do I file? Also, I have a federal tax identification number because the LLC is in me and my wife's name (partnership). Please help!
I don't have an answer for your question, but I am interested in asking you a question. How does one go about "starting" and LLC? Thanks
An LLC files a Form 1065 tax return. Go to www.irs.gov and look up the form and its instructions. Because there are no assets in the LLC, it is possible you don't have to file at all. I'm an attorney, not a CPA, so I'm not sure. I assume your LLC has pass-through taxation so the 1065 is just an information return. Any income or losses get reported on your personal return. Again, with no activity, there is no tax issue there. Regarding the tax id number, you did not need the number. It's optional, although some banks might require it if they're getting involved. But you really didn't need one because of the pass-through taxation. (that's one of the advantages of the LLC by the way) You're supposed to just use the social security number of the spouse who appears first on your 1040.
Regarding how to set up an LLC, if you're certain that's the route you want to take, you can probably get the forms you need directly from the corporation commission of your state. For example, Arizona's corporation commission website has basic forms you can fill in. Your state probably has the same, although the commission might go under a different name. The simplest version is a 1 member, member-managed LLC. You'll need to file articles of organization, pay a fee and publish them. Your state's website will have the requirements listed. Having said this, I add a caveat ... when taxes and asset protection are involved, I suggest getting expert guidance. It's better to spend more time planning this than on figuring out what refrigerator to get -- if you know what I mean.
With no activity would I even need to file a return for 2003? Also, I was told I had to have a TIN if the LLC was in two names.
David
If you just formed it this year, I would talk to a CPA since there are several "elections" which you need to make on your first tax return. While the elections are not usually a life & death matter, they may limit some of your choices down the road.
Other than the elections, you can just file a blank for 1065.
Loafie6
You will find all the information you need to start an LLC in the State of Florida at http://www.dos.state.fl.us/doc/form_download.html.
Also, I believe Mark Warda has published a very informative and helpful reference on forming an LLC as well as one on Land Trusts. Available at Borders and Barnes & Noble.
Good Luck.
hey loafie6- go to www.sunbiz.org-you can file electronically fast, easy, and cheap!
Slow down for one moment!
First of all, an LLC is a pass-thru entity, which means that the taxable items "pass-thru" to your individual income tax returns.
Second, it is not clear from your post, but a single member LLC is considered by the IRS to be a "disregarded entity" and no separate filing would be required. The Treasury recently ruled that if the only members of the LLC are a husband and wife, and they live in a community property state, and they file a joint income tax return, then the husband and wife would still be considered to be a single member and therefore a disregarded entity and no separate filing is required and no separate taxpayer identification number would be required. The part that was not clear to me was this "the LLC is in me and my wife's name (partnership)." What exactly does the partnership mean? Did you form a formal partnership? Or do you simply mean that you and your wife are the sole members of the LLC?
[addsig]
My wife and I are members of the LLC. In the articles of incorporation I put me and my wife as owners/members. Did I need to get a TIN since it's just my wife and me? Do I need to file a separate return, even with no activity? I guess I'm thinking that I need to so the IRS won't see this TIN and wonder where the tax filing is. Thanks to everyone for your help.
An LLC may be classified for Federal income tax purposes as a sole proprietorship (referred to as an entity to be disregarded as separate from its owner), partnership, or a corporation.
If the LLC has only one owner, it will automatically be considered to be a sole proprietorship (referred to as an entity to be disregarded as separate from its owner), unless an election is made to be treated as a corporation.
If the LLC has two or more owners, it will automatically be considered to be a partnership unless an election is made to be treated as a corporation.
If the LLC does not elect its classification, a default classification of partnership (multi-member LLC) or sole proprietorship (single member LLC) will apply.
NC is not a community property state, so unless you elected to be treated as a corporation, your LLC is a partnership. Even though you say your LLC had no activity, you had startup costs didn't you -- filing fees, office supplies, separate telephone line, etc.? Might you really mean to say that your LLC had no income, but your expenses would show a net operating loss?
I did have a filing fee, but no other activitiy. I guess one reason why I wouldn't want to complete the 1065 to show a $150 loss. Can't a business only show a loss for three years or something like that. If you have an LLC that deals with real estate you'll show a loss for many years if you're just getting started. I'll be glad to complete the 1065 if its going to help me with what I have to pay.
Thanks again for all the help.
David
A business that has a plan for profit that legitimately is working towards that and properly documents everything can run negative for decades. Remember how to make a small fortune in the aviation industry? Start with a large one. You can only run negative till you run out of investors willing to gamble.
As long as you look like a business and act like a business you'll be fine. RE doesn't usually fall into the hobby category like making crafts or collecting widgets.
More on the particulars of a single member LLC being "disregarded". Does this mean that when I do my taxes I act like I don't even have an LLC, as in it is never mentioned.
Im thinking it is a form of a corporation so a Schedule C will be required, but the end result is that the taxable income just comes back to my 1040 via the schedule C, versus a corporation that files their corporate taxes independently of any individual.
This is mighty confusing. I actually love doing my taxes, but i'm pretty much dropping back and punting this first year with an LLC and having an accountant do it.
kevin
Depends upon your business and investment approach. If you are using the single member LLC to hold your rental property -- a passive income activity -- then your income and expenses are reported on Schedule E.
If you are using the single member LLC for an active income activity such as buying and selling property, then your income and expenses flow through to Schedule C and Schedule SE.
Remember that the LLC is a state regulated business entity, governed by your state law. For federal income tax purposes, you elect whether the single member LLC is treated as a corporation, or as a disregarded entity. If you had multiple members, then you could opt to be treated as a partnership or as a corporation.
Only in community property states, a LLC, whose only members are a husband and wife, can be treated as a disregarded entity. In all other states, the husband and wife owned LLC is treated as either a partnership or a corporation.
[ Edited by NewKidinTown2 on Date 12/11/2004 ]