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    4 Replies Latest reply on Mar 24, 2010 10:40 AM by snccigars

    LLC Taxes, what to pay?

    snccigars Adventurer

      Our business was officially created July 2009 as an LLC. In 2009 however, we did no business. Am I correct in assuming that we do not need to worry about taxes for 2009? We did make our first official sales in January 2010, so we now have something to report. However, All the money we used to startup was from personal funds, and we have not made any profit so far, our sales have certainly not been brisk so far. My question is, if we report a loss, vs. a profit, do we still file taxes? I know i should probably get an accountant or bookkeeper, but any advice even generic, would be helpful. Thank you.
        • Re: LLC Taxes, what to pay?
          bpfinance Adventurer
          First of all, how is your LLC currently being taxed? An LLC is not a tax structure, it's an entity type and can be taxed as a C-Corp, S-Corp, or disregarded entity (partnership/sole proprietorship). I am not familiar with Montana tax laws, however most states require that business entities file information returns whether the company makes a profit or not.
          Additionally, do you have employees? If you do, there are federal tax requirements and you may have to file returns whether or not you made a profit.
          You may also have to pay taxes to your state regardless of whether or not you earned a profit.
          I worked with a Montana startup a couple of years ago and I don't remember for sure, but if I recall correctly, you have to file an information return for disregarded entities unless you are a single member LLC (SMLLC). You also have to file an annual report and pay a minimal fee.

          Even if you did not make a profit, is there a reason you would have for not claiming a loss? Do you fear that some of your deductions would be disallowed? Generally, you should file a return so that you can claim a loss and reduce your total income so that you pay less to the taxing authorities. There are rules about deducting startup expenses, but if you know you are claiming only legitimate deductions, you should claim the loss. Your tax situation may vary, and if you have already determined that it is better or your tax situation (you are eligible for a credit that you otherwise would not be eligible for) then disregard this paragraph, but if you haven't looked at it, it is something to consider.

          There is a difference between conducting no business and operating at a loss. From your description, it seems that you were conducting business, but simply didn't make a profit.

          Additionally, have you set your website up yet? I'm not able to find it on a quick search. You may want to look into SEO to get more visitors to your site.

          If you need help with any of this, let me know and I would be happy to help you.

          Jeremy Barfield
          Chief Forum Response Correspondent

            • Re: LLC Taxes, what to pay?
              snccigars Adventurer
              Thank you for your answer, it at least points us in the wrong direction. We are set up as a partnership. We do not have any employees, so we don't have to worry about that aspect. As far as not conducting business vs. conducting at a loss: last year, when Stipe & Colon, L.L.C. was created, we did not conduct business. This year, so far, we are operating at a loss. You are correct, despite conducting no business last year, we did have to file an annual report with the state.You stated " you have to file an information return for disregarded entities." Pardon my ignorance, but I am not sure what this means, or what this is, could you please explain more? Our website is not up yet, we are working on making enough sales to pay for it, but we do have a company lined up once we are ready. Thanks again for your advice and help, it is much appreciated!