Go Back
Filing taxes can be stressful. For small business owners, tax season often means long hours sifting through disorganized records to figure out how to file their business and personal taxes. If you own a limited liability company (LLC), do I file my LLC and personal taxes together? The answer depends on how your LLC is taxed, which can change, especially if you have more than one member or elect to be taxed as a corporation. This article will shed light on if you should file your LLC and personal taxes together, how LLCs are taxed, corporate tax accounting, and what it means for your tax return.
Haven offers accounting services for small businesses that can help ease your tax burden and assist you in getting organized for filing your LLC and personal taxes. Our services can help you determine whether to file your LLC and personal taxes together, understand how LLCs are taxed, and what this means for your tax return.
Table of Contents
Do I File My LLC and Personal Taxes Together? Filing Taxes as a Single-Member LLC
Book a Call to Learn More About our Accounting Services (Trusted by 400+ Startups)
Understanding How LLCs Are Taxed
Limited liability companies (LLCs) are one of the most popular types of business entities. The LLC’s flexible taxation options are one reason it is preferred; LLC members can, for the most part, choose how they would like to be taxed. The LLC enjoys this flexibility because the Internal Revenue Service (IRS) does not recognize it as a distinct entity for federal tax purposes. It must, therefore, be taxed as one of the four taxable options already available: disregarded entity, partnership, corporation, or S corporation.
Disregarded Entity: A Tax Classification for Single-Member LLCs
A disregarded entity is a business structure that is not recognized as distinct from its owner for tax purposes. If you are the sole owner of a single-member LLC, the IRS classifies your company as a disregarded entity by default and taxes the LLC as a sole proprietorship. As a result, the owner of a single-member LLC must report the LLC’s income and expenses on the member’s Form 1040 Schedule C. A separate tax return for the entity is not required.
Partnership Taxation for Multi-Member LLCs
When an LLC has multiple members, the IRS’s default classification for tax purposes is that of a partnership. Partnerships, like disregarded entities, pass their income and expenses down to their owners, and LLC members are responsible for paying taxes proportionate to their ownership interests. Income, credits, and deductions are reported to the IRS using Schedule K-1 (Form 1065).
How LLCs Can Elect Corporate Taxation
If an LLC does not want to be taxed as either a sole proprietorship or a partnership, it can elect to be taxed as a corporation by timely filing Form 8832. Electing to be taxed as a corporation may be beneficial in several ways.
Tax Savings with Corporate Election for LLCs
If the company does not intend to pay out dividends, electing to file taxes as a corporation allows LLC members to avoid reporting the business’s income on their personal income tax returns. Because personal income tax rates are often higher than corporate income tax rates, individuals may benefit from the lower corporate income tax rate. Additionally, LLC members may be able to avoid paying self-employment taxes. Thus, corporate taxation may have money-saving benefits for LLC members.
S Corporation Taxation: Unique Benefits for LLCs
The S corporation tax election is unique in this regard. Unlike the other three options described above, the S corporation is not a different entity type. Instead, it is a corporation that meets all of the following criteria:
It has fewer than 100 owners, all of whom are United States citizens or residents. It has only one class of membership, and its membership does not comprise any partnerships, corporations, or non-resident aliens.
Tax Advantages of S Corporation Election
If an LLC chooses to be taxed as an S corporation, the LLC members enjoy pass-through taxation, unlike a standard corporation. Moreover, the income that is taxed as a distribution is not subject to self-employment tax. An S corporation allows its owners to take advantage of the Qualified Business Income Deduction, which is up to 20 percent. There are limitations regarding which industries qualify for this unique deduction. You must timely file IRS Form 2553 to elect S corporation taxation.
Do I File My LLC and Personal Taxes Together? Filing Taxes as a Single-Member LLC
A single-member LLC is a disregarded entity, meaning it is not taxed as a separate business structure. Instead, all of the business’s income and expenses are reported on your tax return. For federal tax purposes, the IRS treats single-member LLCs in this manner. So, if you operate a single-member LLC, there’s no need to file a separate federal return for the business. Instead, you’ll report your LLC’s income and expenses on Schedule C (Form 1040) and file it along with your tax return.
Single-Member LLC Taxes Made Simple
This process is often referred to as “filing together.” You’re not filing a separate federal return for the LLC; you’re simply including the business’s financial details within your return. This setup eliminates the need for a standalone return and simplifies compliance for small business owners operating independently.
What Does It Mean to Be a Pass-Through Entity?
A single-member LLC is classified as a pass-through entity, meaning the business itself does not pay income tax. Instead, all profits (and losses) pass through to you and are taxed at your tax rate. There’s no separate small business tax rate or corporate tax; in this case, the IRS taxes your income as though you earned it directly. This is the same tax treatment applied to sole proprietorships, which is why a single-member LLC is often described as being taxed “like a sole proprietor.”
I Made No Money This Year. Do I Still Need to File?
If your single-member LLC had no income and no expenses, technically, you’re not required to file Schedule C for it. It’s generally advisable to do so anyway, notably if you incurred any deductible business expenses or want to ensure proper documentation is on file with the IRS. In any case, if you earned other income (employment, investment, or income from another business), you’ll still need to file a personal tax return, and you may need to include Schedule C if other self-employment income exists.
Haven: Full-Stack Finance for Startups
Let your business take flight while Haven manages your financial runway. Built by founders for founders, we handle everything from daily bookkeeping to complex tax filings and R&D credits that put cash back in your pocket, as well as fractional CFO services. Join 400+ startups who've saved millions in tax credits, countless hours of administrative work, and never missed a filing deadline - all while accessing 24/7 Slack support from CPAs who understand the unique challenges of growing businesses. Book a call today to learn how our dedicated team can help you focus on building rather than bookkeeping.
Related Reading
• Business Taxes vs Personal Taxes
• TurboTax vs CPA
• Tax Preparer vs CPA
• Can a CPA Help With Tax Problems
• Corporate Income Tax Filing Requirements by State
• How to Do Business Taxes
Filing Taxes as a Multi-Member LLC
When your multi-member LLC files taxes, it won't pay federal income taxes like a corporation. Instead, the IRS treats it like a partnership. That means it will report its income, gains, losses, deductions, and credits on Form 1065. The LLC itself won’t pay any taxes. Instead, it will inform the IRS of the amount each member receives, and they will pay taxes on their share of the profits. This is called pass-through taxation, and it’s what makes LLCs so attractive to business owners.
The Role of Form 1065 and Schedule K-1
After filing Form 1065, the IRS requires multi-member LLCs to prepare Schedule K-1 (Form 1065). This document reports each member’s share of the LLC’s income, deductions, and credits for the year. The LLC issues a K-1 to each member, who will use it to complete their personal tax return, Form 1040. Even if the member didn’t receive a cash distribution, they must report and pay taxes on any income allocated to them on the K-1.
What if There’s No Business Activity?
Multi-member LLCs with no business activity are off the hook for filing Form 1065. If the business had no income and no expenses, it could simply skip the filing and move on. If the LLC wants to claim any deductions or credits, even if it has no income, it must still file. This rule applies to new LLCs and those that have paused operations. Even if technically not required, filing may still be worthwhile.
LLCs Taxed as Corporations
When an LLC elects to be taxed as a C corporation, it is treated separately from its owners for tax purposes. This means it must file Form 1120, U.S. Corporation Income Tax Return, every year. It does so regardless of whether it had any income or business activity.
Double Taxation in C Corporations
A C corporation pays corporate income tax directly on its taxable profits, currently at a flat rate of 21%. If the corporation then distributes any profits to its owners (shareholders) as dividends, those dividends are taxed again on the shareholders’ tax returns. This is known as double taxation: once at the corporate level and again at the individual level. C corporation shareholders do not report the company’s income or loss on their returns unless they receive dividends. Nor can they deduct corporate losses on their tax returns.
Filing as an S Corporation
An LLC may instead elect to be taxed as an S corporation if it meets specific IRS requirements (such as having 100 or fewer shareholders who are U.S. individuals). An S corporation is a pass-through entity, meaning it does not pay federal income tax itself. Instead, it files an informational return, Form 1120S, U.S. Income Tax Return for an S Corporation, and passes through income, losses, deductions, and credits to its shareholders. Each shareholder receives a Schedule K-1, which outlines their share of the company’s revenue or losses. They then report this information on their tax return.
S Corporations and Limited Tax Liabilities
This structure avoids double taxation on the company’s profits while still maintaining a corporate tax identity. S corporations may be subject to limited entity-level taxes, such as taxes on built-in gains or excess passive income.
Personal Tax Filing for Owners
Owners of an LLC taxed as a C corporation report only what they receive, typically in the form of salaries or dividends. These are taxed separately from the corporation’s income. In contrast, owners of an S corporation report their share of the business’s income even if they didn’t receive a distribution because profits are taxed when earned, not when paid out.
Why LLCs Elect Corporate Taxation
There are strategic reasons why some LLCs choose to be taxed as corporations, particularly as S corporations. The primary reason is to reduce self-employment tax liability. In an S corporation, owner-employees can pay themselves a reasonable salary (subject to payroll tax) and take the rest of their earnings as distributions, which are not subject to self-employment tax. For C corporations, businesses may elect this structure to retain earnings within the company or to access certain corporate deductions and benefits.
Related Reading
• LLC vs C Corp for Startup
• Ecommerce Sales Tax
• Small Business Tax Preparation Checklist
• Tax Loopholes for Small Business
• Business Tax Compliance
• How to Lower Tax Liabilities
• Small Business Sales Tax Exemption
• CPA vs Tax Accountant
When to Work With a Tax Professional
Many LLC owners can manage their tax filings, especially if they run a single-member LLC with straightforward income and expenses. But tax filing can get complicated quickly. LLCs with multiple members taxed as partnerships need to file Form 1065 and issue K-1s to each member. Mistakes in this process can trigger IRS scrutiny or incorrect personal filings for each owner. Similarly, LLCs that elect to be taxed as S Corporations face stricter compliance requirements, including reasonable salary calculations, payroll reporting, and quarterly estimated taxes. These require not just bookkeeping accuracy, but a deeper understanding of tax rules.
When Your LLC Operates In More Than One State
Many states have their own LLC filing obligations, including annual reports, franchise taxes, or state-specific forms. If your LLC operates in more than one state, or if your home state has complex tax rules, it’s easy to overlook local requirements, which can lead to penalties or loss of good standing. A tax professional who understands your state’s tax system can help you stay compliant and avoid unnecessary fines.
S Corporation Strategy and Payroll Setup
Electing S Corporation status can offer real tax savings, but only if handled correctly. You must set up and manage payroll, determine a reasonable salary, and maintain clear separation between business and personal finances. A tax professional can ensure you meet all the formalities the IRS expects and help you avoid issues related to underpayment of employment taxes.
Other Situations That Warrant Help
Other situations may warrant help from a tax professional. For instance, if you have foreign income or international business activity, it’s best to get guidance. The same applies to partnerships, LLCs with capital investments, depreciation schedules, or carryover losses, as well as those who are unsure about how to categorize income and expenses correctly. You should also consult a professional if your LLC has changed ownership or merged with another entity, or if you want to plan for retirement contributions, estimated taxes, or future tax elections.
Peace of Mind and Strategic Planning
Working with a tax professional isn’t just about compliance; it’s also about clarity and long-term planning. A good advisor will help you understand how your LLC is taxed, identify opportunities for deductions or savings, and provide the confidence that your filings are accurate and submitted on time. If you’re unsure whether your situation requires professional support, it often makes sense to have a one-time consultation to determine the best course of action. The cost of a tax professional is usually outweighed by the value they bring through reduced risk, better record-keeping, and tax-efficient decision-making.
Related Reading
• Best Outsourced CPAs for Startups
• How Long to Keep Business Tax Returns
• Can I Deduct Tax Preparation Fees
• Best Accountants for Small Business
• Are Business Loan Payments Tax Deductible
• Sales Tax Compliance Outsourcing for Business Startups
• Bench vs Pilot
• Accounting for Tech Companies
• Corporate Tax Planning Strategies
• Is Rent Tax Deductible for Business
• Small Business Tax Planning
• How to File Taxes When One Spouse Owns a Business
• How to Find a Good CPA
Book a Call to Learn More About our Accounting Services (Trusted by 400+ Startups)
Let your business take flight while Haven manages your financial runway. Built by founders for founders, we handle everything from daily bookkeeping to complex tax filings and R&D credits that put cash back in your pocket, as well as fractional CFO services.
Haven: Full-Stack Finance for Startups
Join 400+ startups who've saved millions in tax credits, countless hours of administrative work, and never missed a filing deadline - all while accessing 24/7 Slack support from CPAs who understand the unique challenges of growing businesses. Book a call today to learn how our dedicated team can help you focus on building rather than bookkeeping.