Form 1065 for multi-member LLCs

A multi-member LLC (two or more members) is taxed as a partnership by default. The LLC files Form 1065 as an informational return; the income flows to each member via Schedule K-1, and each member reports their share on their personal return.

Form 1065 due date

March 15 for calendar-year LLCs. Extension via Form 7004 pushes to September 15. The penalty for filing late without extension is $245 per partner per month, capped at 12 months. Not trivial.

Schedule K-1

Each member receives a K-1 showing their share of the LLC's income, deductions, credits, and capital. The K-1 is the source document for the member's personal tax return · typically the schedule B (interest/dividends), Schedule E (partnership income), and Schedule SE (self-employment) entries.

Members receive K-1s by March 15 (or September 15 if the LLC extended). If your accountant is filing the 1065 for the LLC, ask about K-1 timing early · late K-1s force members to extend their own returns.

Special allocations

Distributive shares default to ownership percentages. The Operating Agreement can specify different allocations (preferred returns, capital-vs-services splits, special allocations of depreciation). Special allocations must have "substantial economic effect" under IRC 704(b) · the OA cannot just shift losses to whoever needs them most.

Partner-level reporting

Each member pays self-employment tax on their share of LLC income if they are an active member (working in the business). Passive investors (capital-only members not active in operations) generally do not owe SE tax on their share. The distinction matters and is fact-specific; document each member's role in the OA.

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