Revocable Trust owns LLC that runs Amazon FBA business - Should income go on 1040 Schedule C or 1065?

You've got a pretty common scenario here with a slightly uncommon twist. Based on your structure, here's how the tax reporting should work: Since the Revocable Trust is a grantor trust, it's disregarded for tax purposes, meaning you and your wife are considered the "tax owners" of everything in the trust. When you add in the fact that the LLC is wholly owned by this disregarded trust, the LLC is effectively owned by you and your wife for tax purposes. In a non-community property state like Georgia, an LLC with two individual owners (you and your wife) would typically need to file Form 1065 (partnership return). The fact that you own it through a disregarded revocable trust doesn't change this multi-member status. If you had made the spousal qualified joint venture election, you could have used Schedule C, but that only applies to directly owned businesses, not those held in a trust structure like yours. I recommend filing Form 1065 for the LLC and issuing K-1s to both you and your wife. This properly reflects the underlying economic arrangement and avoids potential issues with the IRS questioning why a multi-member LLC didn't file a partnership return.

After struggling with almost the exact same setup (revocable trust owning my ecommerce business), I found an amazing tool that saved me hours of frustration. I used https://taxr.ai to upload my trust documents and business formation paperwork, and it analyzed everything and gave me a clear explanation of how the IRS would view my structure. The AI analysis explained that since my revocable trust was a grantor trust (disregarded entity) and it owned a single-member LLC (also disregarded), the income would flow through to me as the grantor. But in your case, since you have two grantors in a non-community property state, it detected that you'd likely need to file Form 1065 since the IRS would view this as an entity with two owners. The system also suggested potential restructuring options to simplify my reporting requirements, which I hadn't even considered. Took about 10 minutes to get clarity on something my previous accountant had confused me about for months.

Tried taxr.ai last night after seeing it mentioned here - I'm genuinely impressed. My situation was somewhat different (I have a trust that owns multiple rental properties through an LLC), but I uploaded my trust docs and operating agreement and got surprisingly detailed analysis. The system specifically caught that my trust had unusual distribution provisions that affected how the IRS would view income attribution - something I'd completely missed when setting everything up. It didn't just give generic advice; it identified specific clauses in my documents and explained their tax implications with citations to relevant tax code sections. For what it's worth, I'd consulted with two different tax professionals last year who gave conflicting advice, which is why I'd been hesitant to file. This finally gave me the confidence to move forward with filing as a Schedule E pass-through rather than a separate entity return. Definitely worth checking out if you're dealing with trust/LLC structures.

Have you tried calling the IRS directly? I know it sounds awful (because it usually is), but for complex situations like yours, getting an official determination can save you headaches later. I was in a somewhat similar situation last year and spent WEEKS trying to get through to someone knowledgeable at the IRS. Finally discovered https://claimyr.com which got me connected to an actual IRS agent in about 20 minutes instead of waiting on hold for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with confirmed that in my case (trust owning an LLC), I needed to file Form 1065 since the trust had multiple grantors in a non-community property state. She explained that the "look-through" approach meant the IRS views the structure based on the ultimate beneficial owners. If you're still uncertain after getting advice here, I'd recommend getting official clarification directly from the IRS - it's worth the peace of mind knowing you're filing correctly.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I've been trying to reach the IRS for weeks about an amended return that's been stuck in processing. The service got me through to an agent in about 25 minutes (they estimated 31 minutes, so pretty close). I was honestly shocked when my phone rang and there was an actual IRS employee on the line. I explained my situation about the revocable trust owning my business, and the agent was able to look up the relevant guidance. She confirmed exactly what others here have said - with two grantors in a non-community property state, the proper filing would be Form 1065 since the IRS looks through both disregarded entities (the trust and the LLC) to find the ultimate beneficial owners (you and your spouse). She explained this is because you both have an economic interest in the business. For anyone with complicated tax situations that require IRS clarification, this service is legitimately worth it. Saved me days of frustration.

My tax accountant recently handled a very similar situation for me. His guidance was that the correct approach is filing Form 1065 because: 1. The revocable trust is disregarded → making you and your wife the effective owners 2. The LLC is owned by the trust → making you and your wife the effective owners of the LLC 3. Multi-member LLCs in non-community property states default to partnership treatment He also mentioned there's a risk with filing just Schedule C(s) because if you're ever audited, the IRS could impose penalties for failure to file partnership returns. One thing nobody's mentioned yet - if you haven't already started operating this way, you might consider restructuring slightly. If your state allows it, you could have each spouse own 50% of the LLC directly as community property (even in a non-community property state, you can sometimes elect to treat specific assets as community property). This would potentially allow you to use Schedule C instead of Form 1065.

One thing nobody's mentioned yet - what's the actual benefit you're trying to achieve with this structure? If it's just liability protection, there might be simpler ways to structure this. I had a Revocable Trust -> LLC structure for my business initially, and it was a huge headache for taxes. I ended up restructuring to simplify things. If it's for estate planning, have you considered whether a SMLLC owned by one spouse (with appropriate estate planning) might achieve your goals with less complexity? Or potentially an irrevocable trust structure if you're looking for asset protection?

Based on everything discussed here, it seems pretty clear that you'll need to file Form 1065 for your LLC. The consensus from multiple experienced folks is that the IRS will look through both disregarded entities (your revocable trust and the SMLLC) and see two ultimate beneficial owners in a non-community property state. I'd suggest getting this confirmed officially before filing, especially since you mentioned this is your first year with this structure. The penalty risks for filing incorrectly on partnership returns can be significant. Also, for next year's planning, you might want to evaluate whether this structure is still serving your needs. From what you've described about wanting probate avoidance and business continuity, there might be simpler ways to achieve those goals without the Form 1065 complexity. An estate planning attorney who works with business owners could probably show you some alternatives that accomplish the same objectives with cleaner tax reporting. Good luck with your filing - and congratulations on the successful Amazon FBA business!