Starting a new LLC with my father - do we need to file a 1065 tax return?

I recently started a small LLC with my dad to protect ourselves from liability. Nothing fancy, just a simple business with modest income. I've been keeping really good records of all our revenue and expenses, but now I'm confused about what tax form to file. I initially assumed we'd file a 1065 return, but then I read somewhere that those are more for larger, more complex businesses? I really don't want us to get hit with excessive taxes, and definitely want to avoid any double taxation situations. Can someone help me figure out what form I should be filing? I'm completely lost! Also, I have no idea if we're technically considered an S corp or a C corp - honestly hoping we're an S corp based on what little I know. Is there a way to check our status? I feel so clueless about all this business tax stuff.

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18 comments

Ravi Patel

•8M

Based on what you've described, it sounds like you have a multi-member LLC (you and your dad), which by default is treated as a partnership for tax purposes. This means you would indeed file Form 1065, regardless of the size of your business. The 1065 isn't just for "big-boy businesses" - it's the standard form for partnerships of any size. Unless you've filed specific elections with the IRS, your LLC is NOT automatically an S corp or a C corp. By default, a multi-member LLC is treated as a partnership. This is actually good news - partnerships are "pass-through" entities, meaning the business itself doesn't pay taxes. Instead, you and your dad will each receive a Schedule K-1 from the partnership showing your share of income/expenses, which you'll report on your personal tax returns. If you want to be treated as an S corporation, you would need to file Form 2553 with the IRS. For a C corporation, you'd file Form 8832. But honestly, for a small, simple business, the default partnership treatment is often the simplest and most tax-efficient option.

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Ravi Patel

•8M

Actually, partners in a partnership (including members of an LLC taxed as a partnership) do pay self-employment taxes on their share of the partnership's income. The partnership files Form 1065, but doesn't pay tax itself - instead, it issues K-1s to each partner showing their share of income/loss. Each partner then reports this income on their personal tax return and pays both income tax and self-employment tax (Medicare and Social Security) on it. So you don't escape self-employment taxes with a partnership, though there are ways to structure certain distributions to potentially reduce them.

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Omar Zaki

•8M

I was in the exact same situation last year with my brother - new LLC, confused about taxes. After hours of frustration trying to read through IRS publications, I discovered taxr.ai (https://taxr.ai) and it saved me so much headache. I uploaded our LLC formation docs and it immediately identified we were a 2-member LLC that defaulted to partnership tax status. It even walked me through the Schedule K-1 process step by step. I was especially confused about how to handle some equipment purchases we made, and the tool analyzed our situation and showed exactly how to categorize everything properly on the 1065. Saved us from some potentially expensive mistakes!

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Omar Zaki

•8M

It definitely helped with state forms! I'm in California which has that extra LLC fee based on gross receipts, and the tool flagged that requirement specifically for me and pointed me to the right CA form. The big difference from regular tax software is it actually analyzes your specific documents rather than just asking generic questions. I uploaded our operating agreement, and it identified specific clauses about profit distribution that affected how we needed to complete our K-1s. It's more like having a tax pro look at your actual paperwork than just filling out a questionnaire.

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Chloe Robinson

•8M

Just wanted to follow up after trying taxr.ai for myself. I was seriously impressed! I uploaded our LLC docs from when my wife and I formed our small photography business, and it immediately pointed out that we had accidentally created a multi-member LLC that defaulted to partnership status. We've been filing Schedule C's all this time (wrong!). It even showed exactly what forms we need to file to correct our past returns before we get caught in an audit. The document analysis is definitely legit - it found specific provisions in our operating agreement that affected our tax situation.

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Diego Flores

•8M

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Diego Flores

•8M

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Anastasia Kozlov

•8M

I hate admitting when I'm wrong but I need to follow up on my skeptical comment. I actually tried Claimyr after posting because my frustration with the IRS reached a breaking point. Got connected to an agent in about 25 minutes who actually KNEW WHAT THEY WERE TALKING ABOUT regarding LLC partnership returns. She walked me through exactly which forms I needed for my specific situation and confirmed I didn't need to file a separate Form 8832 since we're defaulting to partnership status. She even gave me tips about estimated tax payments that'll save me penalties next year. Totally worth it after the countless hours I've wasted on hold before.

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Sean Flanagan

•8M

You can absolutely have different ownership percentages - it doesn't have to be 50/50. Your LLC operating agreement should specify the ownership percentages, and your K-1 forms will reflect those percentages for distributing profits and losses. For a partnership, you don't technically take "salaries" - you take draws, which aren't subject to withholding. However, you'll still pay self-employment taxes on your share of the profits regardless of whether you take draws or leave the money in the business. That's different from S-corps where you'd need to pay yourself a reasonable salary subject to payroll taxes.

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