| Here's an important business tax preparation | | | | 7004. If the LLC files the extension, then the LLC |
| question: If you have recently started a business, | | | | has until Sept 15, 2011 to file Form 1065. |
| when are you required to begin filing income tax | | | | An LLC can also be taxed as a corporation (either |
| returns? Let's answer this question by considering | | | | a regular corporation or an S Corporation), |
| a typical example. | | | | provided the proper paperwork is filed with the |
| Let's say you and your two business partners | | | | IRS. If that's the case, then the LLC should file |
| form an LLC in November 2010. You don't make | | | | Form 1120 or Form 1120S by March 15, 2011, or |
| any money during the last two months of the | | | | file an extension on Form 7004, giving the LLC |
| year, as you are just laying the foundations, | | | | until September 15, 2011 to file the 1120 or 1120S. |
| assembling your team of advisors (accountant, | | | | (Form 1120 is for regular corporations; Form |
| attorney, insurance, etc) and doing other | | | | 1120S is for S Corporations.) |
| preliminary activities. And you don't really have | | | | Bottom line: even a business with no income and |
| any expenses yet. | | | | no expense should prepare and file a return -- |
| You do apply for and receive a federal tax | | | | just put zeros on every line. Otherwise, the |
| identification number (EIN) from the IRS, and you | | | | business could be subject to the late filing |
| also get a tax ID from your state. | | | | penalties, which can add up fast. Returns with no |
| Do you have to file an income tax return for this | | | | tax are still subject to a late filing penalty of $89 |
| first year, even though the business was only in | | | | per owner for each month (or part of a month) |
| existence for the last two months of the year | | | | that a return is filed late. So in the scenario above, |
| and had no income or expenses? | | | | a three-member LLC would be fined $267 ($89 x |
| The answer is "Yes." | | | | 3) for each month that the return is late, up to a |
| Here's why. Since you have an IRS-issued federal | | | | maximum of 12 months. |
| tax ID, you are in their system and the IRS will | | | | To be safe, always prepare and file a tax return |
| be expecting you to file an income tax return for | | | | for any year that the business is in existence, |
| 2010. Since there are three owners (members), | | | | whether or not there was any activity. Otherwise, |
| by default the LLC would be taxed as a | | | | you could end up paying hundreds or even |
| partnership, so the business should file Form 1065 | | | | thousands of dollars in late filing penalties. |
| by April 15, 2011, or file an extension on Form | | | | |