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Tax Matters

When Does a New Business Have to Start Filing Income Tax Returns?

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Here's an important business tax preparation question: If you have recently started a business, when are you required to begin filing income tax returns? Let's answer this question by considering a typical example.

Let's say you and your two business partners form an LLC in November 2010. You don't have a profit during the last two months of the year, as you are just laying the foundations, assembling your team of advisors (accountant, attorney, insurance, etc) and doing other preliminary activities. You don't have any sales yet, but you do incur some expenses to get things going.

You do apply for and receive a federal tax identification number (EIN) from the IRS, and you also get a tax ID from your state.

Do you have to file an income tax return for this first year, even though the business was only in existence for the last two months of the year and had no profit?

The answer is "Yes."

Here's why. Since you have an IRS-issued federal tax ID, you are in their system and the IRS will be expecting you to file an income tax return for 2010. Since there are three owners (members), by default the LLC would be taxed as a partnership (assuming that you've haven't chosen to be taxed as a corporation), so the business should file Form 1065 by April 15, 2011, or file an extension on Form 7004. If the LLC files the extension, then the LLC has until Sept 15, 2011 to file Form 1065.

An LLC can also be taxed as a corporation (either a regular corporation or an S Corporation), provided the proper paperwork is filed with the IRS. If that's the case, then the LLC should file Form 1120 or Form 1120S by March 15, 2011, or file an extension on Form 7004, giving the LLC until September 15, 2011 to file the 1120 or 1120S. (Form 1120 is for regular corporations; Form 1120S is for S Corporations.)

Bottom line: even a business with no profit should prepare and file a return. Otherwise, the business could be subject to the late filing penalties, which can add up fast. Returns with no tax are still subject to a late filing penalty of $89 per owner for each month (or part of a month) that a return is filed late. So in the scenario above, a three-member LLC would be fined $267 ($89 x 3) for each month that the return is late, up to a maximum of 12 months.

To be safe, always prepare and file a tax return for any year that the business is in existence, whether or not there was any profit. Otherwise, you could end up paying hundreds or even thousands of dollars in late filing penalties.

{ 39 comments… read them below or add one }

Joanne Tarazi June 19, 2019 at 3:30 pm

Hi we are started a non profit for refugees and the article of the corporation was filed Oct 1 2018. We submitted the 990N postcard stating Jan 1 2018 to Dec 31 2018 even though the Corporation were filed Oct 1 2018. We are trying to file the AG990-IL is it ok to keep the filing Jan 1, to Dec 31 2018 or do I need to stick with Oct 1 2018 filing.

Joanne Tarazi


Van March 12, 2019 at 4:17 pm

I registered a sole proprietorship in Nov 2018, but have not applied for a federal tax ID yet. I haven’t operated and there is no expense, no profit. Do I have to file tax for 2018? Many thanks!


Linda Liu February 20, 2019 at 12:30 am

I received approval articles of incorporation on December 29 2017, then I received for EIN on Mar. 02 2018.Do I have to file tax return for 2017?


Jeff Jackson March 8, 2019 at 1:57 pm

If incorporated in 2017, tax return is due for 2017. If not filed, you may be subject to a penalty.


Tim February 11, 2019 at 11:36 pm


Incorporated 11/2018.
No business has been conducted yet.

– I assume we still have to file a tax return?

– As of 2/2019 can I elect S-Corp status for 2018?

-which tax do I file s or c?


Jeff Jackson March 8, 2019 at 1:59 pm

Since incorporated in 2018, you will need to file a tax return. You may file as a C-Corp or S-Corp. Seek tax assistance to determine which is better in your situation….Most likely S-Corp.


Evelyn Jones December 11, 2018 at 10:49 am


My daughter sales her paintings. She doesn’t have an EIN number as of yet. Her customers send their payments through the cash app. Her paintings can be as low as $25.00 and as high as $600.00 to $1000.00. Does she need to worry about the IRS yet since she doesn’t have an EIN? But once she gets one.. what is the protocol for that? Thanks for any information that you can offer.


Juan Vasquez January 24, 2019 at 5:14 am

Hi Evelyn! Here are my two cents. By your description of the situation, your daughter is running a “business” and if she makes more than $400 dollars a year then she’s required to report her earnings on a Form 1040 Schedule C and pay Self Employment taxes off her Net Income. She will need to add all her sales (Gross Income) and then subtract all her business-related expenses to arrive at her Net Income. It’s a good idea to obtain an EIN if she would like to open a “business” account and keep the income (sale’s money) and expenses separate from her “personal” funds. An EIN number becomes more of a necessity when you actually have employees and need to do payroll. I hope this helps…. (xclservices.com)


Jeff Jackson March 8, 2019 at 2:01 pm

Based upon your description, your daughter is operating a business and is required to file Schedule C whether she has net income or a net loss. If she has more than $400 of net profit, she will owe self-employment taxes on the income.


Katie Kunert October 17, 2018 at 10:45 am

I started a business in August (on my own) and incurred expenses. But I didn’t get my tax ID until recently. Can I still claim my expenses when tax time comes since August? I have all my records for everything.


Jillian Torma Bjork March 20, 2018 at 4:36 pm

If I bought a business that is a franchise, and I registered an LLC but it was in September. Where do I put the expense of 80k I paid upfront for the franchise? what form?


Harold Hartmann June 1, 2018 at 9:35 am

Jillian – hopefully you filed an extension? Please seek help form a qualified CPA for this answer. You are spending a lot of money and should get it right.


Imani December 20, 2017 at 3:18 am

If I registered a LLC in Dec 2017 and don’t have a Tax ID, but I have an EIN number; but I haven’t started spending money or making money. Would I still have to file income tax?


Raj December 14, 2017 at 9:41 pm

I registered llc in September 2017. Since not doing any business. Hopefully start in April 2018. So there is no income no expenses. Do I have to file income tax in 2018 for the year of 2017


Juan Vasquez January 24, 2019 at 5:22 am

Hi Raj! As this article suggests, perhaps you should file a tax return for the LLC even if it needs to have all zeros. Actually, you may want to list your startup expenses in the return and you may end up with a carryover loss that you could use for the following year… Check with your tax advisor… (xclservices.com)


Channon Moore December 12, 2017 at 11:47 am

I started a entertainment management company with a friend and his name shows on the LLC as the owner but i paid a lot of the expenses can i file my losses on my personal taxes the company never took off


Tracey Jones October 17, 2017 at 11:49 am

I started my business as an LLC on December 18, 2016. I definitely incurred a loss for the initial startup. Is it necessary for me to file taxes for the approx. 2 weeks in business and if so which form should I use


Brian October 11, 2017 at 11:28 am

for those of you questioning why you must file a partnership return when the IRS website says that you only file if you had gross income or paid or incurred an expense… Did you actually not pay or incur any expense? I can’t think of a state that doesn’t require a business to register with that state to transact business – that generally requires a payment of a fee. That fee is usually charged annually. So even if you did nothing at all – absolutely nothing – you should have paid or incurred a filing fee. And if so, you should file the partnership tax return. And even if you take the position that you have no filing requirement, you should file the return anyway to avoid the inevitable tax notice from the IRS asking why you didn’t file a tax return.


Anusha June 23, 2017 at 12:59 am

Hi iam anusha me and my husband starts a one llp software company in oct 2015. I has partnership of 10%. Bt ididnt claim any it past years. But i got a job know i want to show i dnt have any it it in that company.
Is it possible


Syed Shoeb Hyder June 13, 2017 at 12:45 pm

I have landed on 17 April 2017 as immigrant. Got SIN. Now I want to register my business. It needs information about tax returns submitted by me. So far I have not submitted any tax return. How to get registered the business.


Ata May 13, 2017 at 1:07 am

I received the approved article of incorporation on Dec. 15, 2014, but the TIN IRS sent me on Jan. 23 2015, stating that my tax year starts on Jan 2015. So 2015 was my an exempt year for minimum 800$ CA s Franchise tax. So, I paid 800 for 2016. they applied it to 2014; sent me a bill for 1081 for 2015 and a notice that I have to file State tax for 2014. How can I file anything if I didn’t have a TIN for IRS, couldn’t open corporate bank account, couldn’t sign the lease for office space and surely didn’t operate as corp. and all my income for 2014 was filed under sole proprietor TIN. now they threaten me to put a lean on my house. is it insane or what ? how can I fight this?


Mike May 5, 2017 at 10:15 am

This information is wrong. You need to remove it. The IRS website clearly state: “A domestic partnership must file an information return, unless it neither receives gross income nor pays or incurs any amount treated as a deduction or credit for federal tax purposes.”


Don April 3, 2017 at 3:39 pm

Have an win but did no business. Still required to file annual tax return?


Marina February 24, 2017 at 3:12 pm

As a Sole Prop. I filed to become an LLC with 3 members on December 21 2016, received approval until Jan 09, 2017 then I applied for EIN. Do I have to file tax return for 2016? Do I have to file estimated for 2017?


RAUL VALLES April 19, 2017 at 4:54 pm



Louise February 17, 2017 at 10:40 am

We started up business as corp. with 3 shareholders in Feb, 2016 but no activity until Jan. 2017. What business tax return should I file?


Alex Kozlov February 6, 2017 at 2:38 am

That is strange because it clearly says on the IRS website that “A domestic partnership must file an information return, UNLESS it neither receives gross income nor pays or incurs any amount treated as a deduction or credit for federal tax purposes.” Is this an honest post or an attempt to make money for filing unnecessary returns?


Jennifer March 22, 2017 at 3:24 pm

Alex, can you please send me a link to where you saw this?


Jennifer March 22, 2017 at 3:25 pm

found it! Thanks!


Nate Williams January 19, 2017 at 4:42 pm

I formed an LLC and am the only member so far. I want to file an an Entity vs file under my individual and Schedule C. How do I do this?


John December 13, 2016 at 8:46 pm

The question is if I form a non profit corp in the last two weeks of Dec do I have to file a return for 2016 if:

I did not get funded in 2016

I got funded on 12/31/2016

I got funded on 1/2/2017

Thanks for your help. I have tried to research this but cannot find anything.


DeJuan December 12, 2016 at 9:41 am

Just started a business by myself, have EIN and tax id, received no income, do i file?


Jaclyn Valent September 27, 2018 at 4:12 pm

I am trying to start up a small business. I got an EIN which I don’t need since i will not have employees. I need a tax id to buy wholesale good. Do you know how I do that?


Toria November 22, 2016 at 10:06 am

I have 3 partners and we formed an llc through legal zoom. We have not filed for an EIN since we have just been laying the foundation for the business modal. We have obviously not made any money . What tax form do we file if any?


Rahul Barma November 22, 2016 at 3:39 am

We have incorporated a Pvt Ltd company in the year 2014 with all valid documents and other mandatory requisites such as Current account,PAN and since then no business was done . Even we never opted for tax return as there was not a single business transaction took place

Recently one of my friend told me that it is mandatory to close a company which is not in function.

Please let me know is it really needed to close a non functional company as I have read some reviews online where I have seen no functional companies automatically get closed after 5 years .


Pauline November 17, 2016 at 10:50 am

My single member LLC was incorporated in Delaware and I paid tax to Delaware every year to keep my LLC active. But I never applied EIN. Do I still need to file tax return?


V.M April 30, 2016 at 9:33 pm

Got my ein no. Been I business 4 mons soul pryter. Where do start do I deduced my pay do I or . lost.


julia February 16, 2016 at 7:12 pm

how about i just register my business in Nov, 2015, and have not apply the EIN number. do i also need to file the tax return for my business? which form i have to fill out in this situation?


Gloria March 25, 2015 at 9:38 am

Question I received EIN number but did not start my business, and I don’t have employeess or partners just me and no foundation do I file


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