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Note: This article only applies to Multi-Member LLCs owned by US residents and US citizens.
A Multi-Member LLC is taxed like a Partnership by the IRS for federal tax purposes.
A Multi-Member LLC reports taxes to the IRS on Form 1065. But a Multi-Member LLC doesn’t pay taxes to the IRS. Instead, the owners of the LLC pay the taxes on their personal tax returns.
This is because a Multi-Member LLC has pass-through taxation.
Do you have a Single-Member LLC? If so, please see LLC taxed as Sole Proprietorship.
What is pass-through taxation?
Pass-through taxation means your Multi-Member LLC doesn’t pay its own taxes.
In order to explain pass-through taxation, it’s easier to understand double taxation first.
Double taxation exists for Corporations. The Corporation itself pays taxes on its income. And then the owners of the Corporation each pay taxes again on their share of the profits.
On the other hand, Multi-Member LLCs have pass-through taxation. This means the LLC doesn’t pay its own taxes. But instead, the LLC owners pay the taxes for the LLC on their personal tax returns. Therefore, pass-through taxation avoids double taxation.
For example: Let’s say Nick, AJ, and Kevin own Mainstreet Men LLC, a Multi-Member LLC. Mainstreet Men LLC must file Form 1065 with the IRS, but Mainstreet Men LLC doesn’t pay any taxes to the IRS. Instead, Nick, AJ, and Kevin must each pay the taxes for profits they received from Mainstreet Men LLC on their personal tax returns.
What is a Partnership?
A General Partnership is a formal agreement between two or more people to operate a business together. The partners share the business assets, profits, and debts.
To learn more, check out What is a General Partnership?
If my LLC is a Partnership, are my personal assets still protected?
Remember, your LLC isn’t a Partnership. It’s just taxed as a Partnership.
The reason an LLC is taxed as a Partnership is because there is no “LLC tax classification” with the IRS. Meaning, the IRS doesn’t tax an LLC “like an LLC”.
Instead, they tax LLCs under already existing classifications (like Sole Proprietorships, Partnerships, and Corporations). And for Multi-Member LLCs, the classification that the IRS automatically uses is Partnership taxation.
Said another way, your LLC is still an LLC (a separate legal entity). It’s just that the IRS is treating your LLC like a Partnership for federal tax purposes.
Does an LLC pay more taxes than a Partnership?
No, an LLC doesn’t pay more taxes than a Partnership. In fact, having a Multi-Member LLC doesn’t affect your taxes at all. It’s no different than if you operated without an LLC (aka as a General Partnership).
Each of the LLC Members will simply pay their regular tax rate (based on their individual tax bracket) on their portion of the LLC’s net income.
Do we pay more taxes with an LLC? No, you don’t pay more taxes with an LLC than you would operating as a General Partnership.
Do we save money on taxes with an LLC? No, you don’t save money on taxes with an LLC.
Do we have to pay taxes for my LLC if it has no income? No, you don’t pay any taxes. However, your LLC still needs to file a 1065 Partnership Return. This must be filed even if there is a loss or no activity.
When are my LLC taxes due?
The Multi-Member LLC informational tax return (Form 1065) is due by March 15th.
Also, the LLC will need to issue K-1s to the Members by March 15th.
And the Members personal tax returns (Form 1040) and tax bill are due by April 15th.
Why does it work like this? Because a Multi-Member LLC has pass-through taxation, the Members must pay the tax bill on their personal tax returns.
When is my first LLC Partnership tax return due?
|Started Doing Business On:||Taxes Due on Profits Earned From:||Tax Filing Due On:|
|December 1, 2025||December 1 to |
December 31, 2025
|March 15, 2026 - Form 1065 is due|
April 15, 2026 - Partners file personal tax returns and pay tax bill
|January 1, 2026||January 1 to |
December 31, 2026
|March 15, 2027 - Form 1065 is due|
April 15, 2027 - Partners file personal tax returns and pay tax bill
Does my LLC need to pay quarterly estimated taxes?
No, LLCs don’t pay estimated taxes. Only individuals pay estimated taxes.
Quarterly estimated taxes have nothing to do with whether or not you have a Multi-Member LLC. But rather, it’s all about how much money you make (including your K-1 income from the LLC). If you owe more than $1,000 in taxes, the IRS requires you to pay quarterly estimated taxes.
Why do things work like this? When someone is employed by a company, taxes are withheld from their paycheck. But now that you’re self-employed (own an LLC), you need to “withhold” your own taxes by making quarterly estimated tax payments. Also, it’s a smart idea to pay throughout the year instead of being surprised by your tax bill in April.
How do I calculate my quarterly estimated taxes? We recommend working with an accountant to determine quarterly estimated taxes. But if you want to do it on your own, you can. First you will need to calculate your expected adjusted gross income, taxable income, and taxes due. Then account for any deductions and credits. This can be done in the Worksheet of IRS Form 1040-ES.
How do I pay quarterly estimated taxes? You can pay quarterly estimated taxes by mail or online.
When are quarterly estimated taxes due? They are due 4 times per year:
- April 15th
- June 15th
- September 15th
- January 15th
Can I pay all my quarterly tax payments at once?
Yes, you can pay the taxes all at once by April 15th for the upcoming year instead of paying four times per year.
Are there penalties for failure to pay quarterly estimated taxes?
Yes, if your payments are late or you don’t pay enough, you may receive a penalty from the IRS.
What tax forms do I file for a Multi-Member LLC?
Multi-Member LLCs taxed as Partnerships report their business income on Form 1065. Then Schedule K-1s are issued to each of the LLC Members showing their portion of the profit.
From there, the K-1 income flows through to each owner’s personal tax return (Form 1040). The owner’s return may also need to include these forms:
- Schedule SE (self-employment tax)
- Schedule E (real estate income)
- Schedule A (other business-purpose deductions)
- Form 1099 (miscellaneous income)
- Form 8829 (expenses for business use of your home)
- Form 8995-A (qualified business income deduction)
Note: Your tax return may require additional Schedules and Forms. It depends on what type of business you have and how you make money.
We recommend hiring an accountant for help with your taxes.
What expenses can I deduct for my LLC?
Expenses that you can deduct for your LLC include, but are not limited to:
- Home office expenses
- If you rent and work from home, you can deduct a portion of your rent.
- You can deduct office supplies and office equipment. For example, a printer and paper.
- You can deduct a portion of your cell phone bill.
- If you buy a second line for business use, you can deduct the entire bill.
- You can deduct a portion of your internet bill.
- LLC costs
- You can deduct the state LLC filing fees, LLC Registered Agent fees, and other LLC expenses.
- You can deduct expenses when traveling for business.
- Professional fee
- You can deduct expenses for an accountant, attorney, or any other professional your business hires.
- Education and training
- You can deduct the costs for any training related to your business, like seminars and online courses.
- Contractors and employees
- You can deduct fees paid to contractors and/or employees.
- Business insurance
- You can deduct any business insurance costs.
- Health insurance
- You can deduct your health insurance premium (unless you’re eligible for health insurance from your spouse’s employer).
The list above doesn’t include all applicable tax deductions. We recommend working with an accountant to make sure you are taking the appropriate deductions.
What do I pay taxes on?
Taxes are paid on net income. Net income is the profit left over after expenses are paid.
Note: You have to pay taxes regardless of whether you leave the profit in the LLC bank account or distribute it to the members.
Does a Multi-Member LLC need an EIN?
Yes, Multi-Member LLCs are required by the IRS to get an EIN. Additionally, you’ll need an EIN to open an LLC bank account. You will also need an EIN if your LLC hires employees.
Tip: Make sure you form an LLC first before applying for an EIN for your LLC.
Multi-Member LLCs can be taxed as a Corporation (optional)
Instead of your LLC being taxed in its default classification (LLC taxed as a Partnership), you have the option of having your LLC taxed as a Corporation (S-Corporation or C-Corporation).
This can be done by making an “election” with the IRS. This election asks the IRS to treat your Multi-Member LLC like one of the following for tax purposes:
Both of these tax elections are more complicated than Partnership taxation. And they should only be made after consulting with an accountant.
LLC taxed as an S-Corporation:
If your LLC pays taxes as an S-Corporation, this can save the owners money on self-employment taxes. We only recommend this type of taxation if your LLC has at least $70,000 of net income per Member.
LLC taxed as a C-Corporation:
And while an LLC can be taxed as a C-Corporation, it’s very uncommon. This typically only makes sense for larger employers who are looking to optimize taxes on health insurance premiums for employees.
What do most people do?
Most people, especially new business owners, keep their LLC taxed in its default classification (LLC taxed as Partnership).
Don’t forget about state and local taxes
Keep in mind that most people with Multi-Member LLCs need to file state and local taxes (like county or city taxes).
This will depend on where you live and how your LLC makes money.
Lastly… Don’t let taxes stop you
We know that all this tax stuff can feel a little overwhelming. Don’t worry, though! You don’t have to figure all this out right away. And you don’t have to do this all yourself (most people hire an accountant for help).
We write articles like this so you’re aware of what’s to come, but don’t let this slow you down! It’s more important that you get your LLC formed, get your business off the ground, and start making money. Besides, your taxes aren’t due for quite some time (not until March of next year). So you can read this page to understand the basics, then form your LLC, and get started on your business.
Again, while most people do hire accountants, you don’t need to find an accountant before forming your LLC. Most people do that many months after they form their LLC.
Tip: If you’re still worried about taxes, here’s the simplest thing to do. Leave 1/3 (or 33%) of your profits from the LLC untouched in your bank account. Don’t spend it so you can use it to pay your tax bill.
IRS contact info
You can call the IRS at 800-829-4933.
Their hours of operation are 7am to 7pm, Monday through Friday.
Tip: Press option 1 > option 1 > option 3 to speak to someone. We recommend calling as early as possible for the shortest hold times.
Frequently Asked Questions about Multi-Member LLCs
Does a Multi-Member LLC file a tax return?
Yes, a Multi-Member LLC files a Partnership Return (Form 1065) with the IRS and issues K-1s to the Members. The Members then report the K-1 income and pay the relevant taxes on their personal tax returns.
Do Multi-Member LLCs pay taxes?
A Multi-Member LLC doesn’t pay taxes itself.
Instead, the LLC owners pay taxes on their share of the profits.
Is a Multi-Member LLC a Disregarded Entity?
No, a Multi-Member LLC isn’t a Disregarded Entity because it needs to file Form 1065 Partnership Return.
Note: The only type of LLC that is a Disregarded Entity is a Single-Member LLC.
What is the Form 1065 Partnership Return?
Form 1065 is an “informational return” that tells the IRS about the Partnership’s business activities. It also tells the IRS how much money each Member received (on Schedule K-1).
Form 1065 doesn’t create an obligation for the LLC to pay taxes. Instead, the Members pay the taxes on their individual returns based on the amounts shown in their K-1s.
Is a Multi-Member LLC the same as a Partnership?
Technically, no. However, in the eyes of the IRS, they are treated the same for tax purposes.
Let’s define some terms:
Partnership (aka General Partnership): When two or more people agree to get together to make money.
- Owned by 2 or more people
- Owners’ assets are not protected from business liabilities
- Not a formal business structure
- No paperwork required to exist (the Partnership simply exists by you and your partners engaging in business activities)
Multi-Member LLC: A legal entity separate from its owners, formed under state law.
- Owned by 2 or more people
- Owners’ assets are protected from business liabilities
- A formal business structure
- Paperwork must be filed with the state to create the LLC
So while a General Partnership and a Multi-Member LLC are legally different, the IRS treats them the same for tax purposes.
Benefits of an LLC vs Partnership (aka General Partnership)
An LLC is better.
This is because there is one major disadvantage to a General Partnership:
With a General Partnership, the partners’ personal assets are not protected if the business is sued.
However, with an LLC, the partners’ personal assets are protected if the business is sued.
And there are no tax advantages or disadvantages to either structure. Meaning, you can deduct the same business expenses and the taxes owed will be the same. This is because the IRS treats Multi-Member LLCs and Partnerships the exact same way.
In summary, a Multi-Member LLC and a General Partnership are taxed the same way. However, LLCs offer additional legal protection that Partnerships lack.
How can a Husband and Wife LLC be taxed?
It depends on the state where you live.
If you and your spouse live in a community property state, you have the option of how you want your Multi-Member LLC to be taxed:
- LLC taxed as Partnership
- LLC taxed as Qualified Joint Venture (aka Sole Proprietorship)
Community property states are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
If you have a husband and wife LLC in a non-community property state, it can only be treated like a Partnership for tax purposes.
11 comments on “LLC taxed as Partnership”
Disclaimer: Nothing on this page shall be interpreted as legal or tax advice. Rules and regulations vary by location. They also change over time and are specific to your situation. Furthermore, this comment section is provided so people can share their thoughts and experience. Please consult a licensed professional if you have legal or tax questions.
Hey Matt, I really appreciate the content you put out here. Very clear and simple to understand!
I only learned today that the IRS is taxing my single-member-LLC as a Partnership, despite us sending the EIN-request form stating it was “Other: disregarded entity”.
Perhaps they did this because I’m a non-resident alien?
For sole-proprietor the EIN-request form requires a SSN.
This means I need to file the 1065, the K-1, and from what I’m reading in this article the 1040 as well.
Given that I’m a non-resident alien, I must file the “Form 1040-ES (NR)”, correct?
Do you know if there’s usually anything else besides these 3 forms required for us non-resident aliens?
Thank you for providing such good quality content!
Hey Nick, thanks very much! No, the IRS wouldn’t tax an LLC as a Partnership just because its Member is a non-US resident. When you say “I only learned today”, via which means did you learn this? Regarding those forms, those are what I’d call the “major” forms. However, a company, or individual’s return is made up of lots of “minor” forms too. And taxes for a non-US resident aren’t always clear-cut. You may or may not have to file certain forms/returns. I recommend working with an accountant that specializes in working with non-US residents.
I learned this because I had three different CPAs last year tell me to file 1120 + 5472. As we’re due to the forms today, I called the IRS just wondering whether they ever got my filing last year.
The lady on the phone went through validation and helped me hinting I was giving one wrong answer about how is my LLC taxed. I thought that being a single-member-LLC it would be a disregarded entity.
I “guessed” several other options and “Partnership” was the correct one, and she said “You should have filed the 1065 last year, not the 1120 + 5472”.
I admit it was my bad because my EIN attribution letter from the IRS clearly says I need to file the 1065, and I never showed that to the CPAs (neither did I remember it).
Hi Nick, thanks for the information. If you are the only Member, then what the IRS agent told you isn’t correct. You shouldn’t file a 1065 Partnership Return. And the Form 1120 and Form 5472 filings are correct. Basically, if an LLC goes from Single-Member LLC to Multi-Member LLC, you just file the necessary return, even though the EIN Confirmation Letter says they are expecting a certain return. This is because the second an LLC goes from Multi-Member LLC to Single-Member LLC (or vice versa), its default tax treatment by the IRS changes. However, you just need to have your “internal file” updated. There’s basically an internal note on your EIN’s “internal file” that says “expecting 1065”. And if you didn’t file a 1040-NR, this is probably the reason the IRS didn’t updated their internal notes. You, or your accountant can write a letter to the IRS explaining the situation. The IRS will have to reply in writing (it’s a rule) and they should easily fix this issue for you. But as far as what you’ve been filing, it’s correct. And that’s what you should continue to file (as long as you have a Single-Member LLC). Hope that helps.
Thanks a lot for clarifying, Matt!
Indeed you’re right. I never filed for the 1040-NR and that may be the reason it never changed in their internal notes that I should file a 1120+5472 instead of the 1065 they currently have in their internal notes.
It didn’t occur to me that the agent could have also been unaware of that. I’m definitely going to work on that letter.
Also, I will definitely check your three recommended accountants for my specific situation.
Thanks again for the amazing support you’ve been providing!
You’re very welcome Nick! For the letter, just make sure to include the LLC name, the EIN, your name, and a return address. And then just explain the situation and ask them to make a note on your account. And when you sign, use the title “Member” or “Owner”. (You could also ask an accountant to write the letter). And if you want the geeky source material for this stuff, it’s in IRS Internal Revenue Manuals > 3.13.2 BMF Account Numbers. Search for the “188.8.131.52” heading. And then below #12, you’ll see a table.
Amazing! Just saw it’s. It’s the very first row. I’ll be sure to quote that!
Thanks again. This has been an incredible eye opener!
You’re very welcome Nick!
We created a multiple member llc in new mexico on 27/01/2023 and we applied for the EIN on 03/02/2023 but we still haven’t received our EIN. in this case, are we still obligated to file our tax return. Or can we only file if we have an EIN?
Hi Billel, since the LLC didn’t exist until the 2023 tax year, there is no 1065 Partnership Return due this year. It’ll be due next year in March, for the 2023 tax year.