How are multi-member LLCs treated for federal income tax purposes?
A:
As a default rule, multiple member LLCs file tax returns in the same manner as a partnership. A partnership pays income tax by filing an information return with the IRS and the individual partners file a Schedule K-1 on their individual tax returns to show their percentage of the profits/losses of the partnership.
Here is the process:
Here is the process:
First, the partnership files an information-only return on Form 1065 and submits it to the IRS; and
Then each partner's share of the profit or loss of the partnership is recorded on a Schedule K-1.
The K-1 information for each partner is reported on Line 17 of the partner's Form 1040.

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