One person owns and runs a single-member limited liability company (LLC), which is a type of business entity. Entrepreneurs frequently opt for it because of its adaptability, simplicity, and limited liability protection. The tax duties of many single-member LLC owners, including whether they must submit a 1065 tax return, are, nevertheless, frequently unclear.
No, that’s not the solution to this query. A 1065 tax return is not necessary for a single-member LLC to file. Instead, using a Schedule C attachment to their Form 1040, the owner of a single-member LLC is required to record the company’s earnings and outlays on their personal tax return.
Multi-member LLCs must submit a 1065 tax return; single-member LLCs are exempt from this requirement. This is so because multi-member LLCs are required to submit a partnership tax return using Form 1065 because the IRS views them as partnerships. This form informs the IRS about the company’s earnings, deductions, gains, losses, credits, and other details.
The fact that a single-member LLC might elect to be treated as a partnership by filing a 1065 tax return is significant. “Checking the box” is what is referred to as and necessitates the LLC owner submitting Form 8832 to the IRS. However, among LLCs with a single member, this is not a typical practice.
Let’s focus on the reason for having an EIN number now. The IRS issues each business entity with a special nine-digit number known as an EIN (Employer Identification Number) to help them be recognized. It is used for filing tax returns, paying taxes, and opening business bank accounts, among other tax-related activities. If a single-member LLC has a bank account, pays excise taxes, or deducts taxes from income received to a non-resident alien, it is still needed to have an EIN even if it has no workers.
You might also wonder if you require a new EIN if you switch to an LLC. Typically, the answer is no. You can utilize the same EIN that you used for your sole proprietorship if you decide to change from being a sole owner to an LLC. However, you will need to apply for a new EIN if you are changing a corporation or partnership into an LLC.
Let’s address the final query, which concerns the usage of the same EIN by various LLCs. No, is the response. Since each LLC is a distinct legal entity, each one needs a different EIN. This also applies to LLCs owned by the same person or organization. The IRS may impose penalties and fines for failure to get a unique EIN for each LLC.
In conclusion, a single-member LLC must disclose its revenue and spending on the owner’s personal tax return even though it is not obliged to file a 1065 tax return. If a single-member LLC maintains a bank account, pays excise taxes, or deducts taxes from income received to a non-resident alien, it must obtain an EIN. When changing from a sole proprietorship to an LLC, a new EIN is typically not needed; but, when changing from a partnership or corporation to an LLC, it is. Even if controlled by the same person or company, every LLC needs a separate EIN.