Should members of LLCs report their income and losses on Schedule C or E?

[jmt111]

NJ

Multiple websites contradict themselves with respect to whether members of one-member LLCs and multiple-member LLCs should report their income or losses from an LLC on Schedule C or on Schedule E.

• According to https://www.nolo.com/legal-encyclopedia/how-llcs-are-taxed-29675.html, the owner of a one-member LLC must report all profits (or losses) of the LLC on Schedule C and the members of a multi-member LLC report their share of profits on Schedule E.
• According to https://info.legalzoom.com/report-income-llc-member-3488.html, members of an LLC must report business income on Schedule C and passive income on Schedule E.
• According to https://www.e-file.com/help/schedule-e.php, the sole member of a one-member LLC should report income on Schedule E.

Which of these web sites is correct?
Should a sole member of a one-member LLC report income and losses on Schedule C or E?
Should a member of a multiple-member LLC report income and losses on Schedule C or E?

 

[LdiJ]

NJ

Multiple websites contradict themselves with respect to whether members of one-member LLCs and multiple-member LLCs should report their income or losses from an LLC on Schedule C or on Schedule E.

• According to https://www.nolo.com/legal-encyclopedia/how-llcs-are-taxed-29675.html, the owner of a one-member LLC must report all profits (or losses) of the LLC on Schedule C and the members of a multi-member LLC report their share of profits on Schedule E.
• According to https://info.legalzoom.com/report-income-llc-member-3488.html, members of an LLC must report business income on Schedule C and passive income on Schedule E.
• According to https://www.e-file.com/help/schedule-e.php, the sole member of a one-member LLC should report income on Schedule E.

Which of these web sites is correct?
Should a sole member of a one-member LLC report income and losses on Schedule C or E?
Should a member of a multiple-member LLC report income and losses on Schedule C or E?

Ok, its not quite that simple, or perhaps even not quite that complicated.

A single member LLC is a disregarded entity for tax purposes and therefore the owner of the LLC would simply file a Schedule C and Schedule SE with their personal tax return.

A multiple member LLC would default to a partnership and would need to file a Form 1065 unless they have made an S-corp election. A Form 1065 is an informational return which would pass through the tax attributes to the partners on a form Schedule K1. A Schedule K1 would send some things to a Schedule E and potentially some other things to other forms. If they made an S-Corp election it gets a bit more complicated.

If you are determined to do things without help then I would suggest that you read the instructions for a partnership Schedule K1 or S-Corp K1 as that might help you understand how things work.

Otherwise, I suggest that you now need a tax professional on board.

 

[Taxing Matters]

A single member domestic LLC is disregarded as a separate from its owner for federal tax purposes unless it has elected to be treated as a corporation. So how the owner of the LLC files in that instance depends on whether it is an active trade or business or not. If it is, then like any sole proprietor of a business, he or she reports the income/loss on Schedule C. But if it is passive income or other non business income then the income is reported on the proper schedules based on what that income is. So, for passive rental income, it would go on Schedule E. If it was just gain or loss from the sale of investment property, that would go on Schedule D. In short, for the single member LLC ignore the fact that there is a LLC there and report the income like any other individual person having that same income.

A multiple member domestic LLC is treated as a partnership for federal income tax purposes unless it has elected to be treated as a corporation. Most income from the partnership ends up being reported on Schedule E. But it depends on exactly what income the partnership has. The schedules K-1 that the partnership gives each partner after the close of the tax year will break that down for the partner and the partner instructions for the K-1 wil tell the partner where each item goes. But Schedule C is not an option for the partners of the LLC to use.

As this relates to your other thread, that means the LLC that runs the gas station is a partnership for federal income tax purposes since it has 3 members. You will not use Schedule C for that. When you read the instructions for each line of the k-1 you get, you'll see that nothing goes to Schedule C.

I really think you need to get help from a tax professional. You do not know enough to handle all the details of the various returns involved and you risk making signficant errors trying to do it on your own.

Please try to keep all your questions about the same thing in the same thread. It makes it easier for everyone to see what you are talking about.