My single member LLC has been active since June 2023. During that time, I opened a business account and I transferred $1k to it from my personal account to pay for business related expenses. To this day, I’ve spent $400 from that $1k to get this business started. Unfortunately I haven’t made any money on the business. How does this translate to my taxes due in 2024?
Here's how you would handle filing taxes for your single-member LLC in this situation:
Even though your LLC has not made a profit, you still need to file a Schedule C with your personal 1040 tax return to report the business activity.
On Schedule C, report the $1,000 transfer from your personal account as "gross receipts.". This represents the money brought into the business.
Claim the $400 you spent on business expenses as deductions on Schedule C. Common deductible startup expenses include things like marketing, website development, supplies, etc. Keep records of all expenses.
The $1,000 transfer and $400 in expenses will net $600 in "net profit" on Schedule C, even though the business has not actually turned a profit yet.
You do not pay income tax on the $600 since the LLC is a "pass-through" entity. But you may owe self-employment taxes on the $600, which help fund Social Security and Medicare.
Any losses from the business can offset other income and potentially be carried forward to future years as a net operating loss.
Be sure to also file any required state tax returns for your LLC.
The key is reporting all business financial activity through your individual return by filing a Schedule C each year, even during unprofitable periods. This keeps everything above board with the IRS.
With my experience as a tax professional, I have consulted with individuals and partnerships on this matter. As a single member LLC, you can file a form Schedule C profit and loss with your individual form 1040 Federal Income Tax Return. A partnership return form 1065 would be needed if this were a multi member LLC. Please feel free to reach out with any further questions or clarifications.
