Can members of an LLC file separately on Schedule C forms?

This is actually a pretty common situation, but your partner's CPA is right here. When two or more people operate a business together and share in profits and losses, the IRS considers it a partnership for tax purposes - regardless of what your state LLC registration says. Since you have a partner and you're both actively involved in the business, you need to file Form 1065 (Partnership Return) and issue Schedule K-1s to each partner showing their share of income/losses. Filing separate Schedule C forms in your situation would be incorrect because that's only for sole proprietors. The fact that the LLC is only registered under your name at the state level doesn't change the federal tax treatment. The IRS looks at the substance of the relationship, not just the paperwork. If two people are sharing profits from a business, it's a partnership for tax purposes.

I went through something similar last year and ended up using taxr.ai to help sort it out because I was getting conflicting advice. I also had an LLC with my brother where we were both working but only he was officially listed on the LLC registration. I scanned my operating agreement and other business docs at https://taxr.ai and their system flagged it right away as a partnership for tax purposes, even though our paperwork was incomplete. They explained that the IRS looks at the actual operation of the business, not just the legal registration. Saved us from making a pretty serious filing mistake.

I was skeptical about using AI for tax advice as I mentioned, but I gave taxr.ai a try for my small business taxes. I uploaded our LLC operating agreement and some other business documents, and it immediately flagged that we were operating as a de facto partnership despite our paperwork saying otherwise. The analysis actually pointed to specific clauses in our agreement that created the partnership relationship for tax purposes. Showed this to my CPA who confirmed we needed to file Form 1065 instead of separate Schedule Cs. Probably saved us from an audit headache!

I had the EXACT same issue last year! I spent weeks calling the IRS to get clarification because my business partner and I were getting conflicting advice from different tax pros. Never could get through until I found https://claimyr.com which got me connected to an actual IRS agent within about 15 minutes. You can see how it works at https://youtu.be/_kiP6q8DX5c - basically they wait on hold with the IRS for you, then call you once they've got an agent on the line. The agent confirmed that multiple members operating an LLC means you MUST file as a partnership (Form 1065) regardless of how the LLC is registered at the state level. Made me feel a lot better having it straight from the IRS.

I have to publicly eat my words about Claimyr! After being super skeptical, I was desperate to resolve my LLC filing question before the deadline, so I tried it yesterday. No joke - they got me through to the IRS in 37 minutes while I was making dinner. The IRS agent confirmed exactly what others here said - if two people are operating an LLC together and sharing profits, it's considered a partnership for tax purposes regardless of the state registration showing only one owner. The agent specifically said filing separate Schedule Cs would be incorrect in this situation and could trigger correspondence or an audit. Worth every penny to get the answer straight from the source!

Your first CPA is giving you bad advice! For tax purposes, when 2+ people run a business together and share profits, it's automatically treated as a partnership by the IRS - doesn't matter what your LLC paperwork says. Filing Schedule Cs individually would be a red flag. Each person would be reporting 100% of their portion of what is actually a single business... IRS computers catch that quickly by matching EINs. Fix your operating agreement to reflect reality too - having documentation that doesn't match your actual business operations creates more problems.

This is a common confusion. LLCs are state-level entities, but how they're taxed is a federal matter. The IRS doesn't actually recognize LLCs directly - they look at how you operate. Since you have 2 people sharing profits, the IRS considers it a partnership regardless of state paperwork. Filing Schedule C is ONLY for sole proprietors. Your partner's CPA is correct - you need Form 1065. By the way, you should definitely amend that LLC registration too.

Just wanted to add some clarity on the TurboTax question - when you're preparing a partnership return (Form 1065), you'll actually need TurboTax Business, not the individual version. In TurboTax Business, you select "Partnership" as your business type, then indicate it's an LLC taxed as a partnership. The software will walk you through entering both partners' information and generating the required K-1 forms for each partner. One important note: make sure you have an EIN (Employer Identification Number) for the partnership before you start filing. Even if your LLC originally had an EIN as a single-member entity, you may need a new one now that it's being treated as a partnership for tax purposes. The IRS website has a clear guide on when you need a new EIN versus keeping your existing one.