A single-member limited liability company is generally reported on IRS Schedule C when it is treated as a disregarded entity for federal tax purposes. In this case, the business activity of the LLC is reported directly on the owner’s individual income tax return rather than on a separate entity-level return.
Disregarded Entity Classification
For federal tax purposes, a single-member LLC is treated as a disregarded entity by default unless it has elected to be taxed as a corporation. When treated as disregarded, the LLC itself does not file a separate income tax return, and its income and expenses are reported on Schedule C as part of Form 1040.
How Schedule C Is Used for Single-Member LLCs
When Schedule C is used for a single-member LLC, the form reports the business’s gross receipts, expenses, and resulting profit or loss in the same manner as a sole proprietorship. The form serves as the mechanism by which the LLC’s activity is integrated into the owner’s individual return. An overview of how Schedule C functions within the return is provided in How Schedule C Relates to Form 1040.
LLC Owner Versus Business Activity
Although a single-member LLC may exist under state law as a separate legal entity, federal tax reporting focuses on the owner rather than the entity when the LLC is disregarded. Schedule C reflects this treatment by reporting the business activity as if it were conducted directly by the individual.
Interaction With Other Schedule C Rules
Income and expenses reported for a single-member LLC on Schedule C are subject to the same general rules and limitations that apply to other Schedule C filers. These include how business expenses are defined and how profit or loss is determined. Key concepts are explained in Business Expenses in Schedule C and Understanding Profit and Loss.
Related Topics and Overview
Eligibility rules for Schedule C are explained in Who Needs to File IRS Schedule C. Guidance on completing the form is provided in How to Complete IRS Schedule C. A complete overview of Schedule C is available in IRS Schedule C Overview, and the official form and instructions issued by the Internal Revenue Service are available in the reference entry at IRS Form 1040 Schedule C.