An LLC, or limited liability company, is generally governed by the requirements of the state in which it is registered. These companies do not have to comply with the same formal reporting requirements as do corporations, but some states require LLCs to file annual reports to remain in good standing. Large LLCs with more formal operations may voluntarily adopt additional reporting requirements to keep all members updated on the financial status of the company.
Many states require LLCs to submit annual reports that simply serve to keep the state informed of the company's management and other basic information. For example, Connecticut LLCs are required to submit an annual report which lists the address of the company; whether it's a domestic or foreign company; and the name and address of at least one member of the LLC. Typically, this type of report is accompanied by an annual fee.
Franchise Tax Report
Some states that do not collect state business income taxes require LLCs and other businesses to pay franchise taxes and file franchise tax reports. For example, the state of Texas imposes a franchise tax on all companies that do business in the state. On the franchise tax report, LLCs need to list the business name and type of business, along with detailed financial information. The report also helps the LLC to calculate the amount it owes in franchise taxes, which it must include when filing the report.
An LLC annual report may also be a financial report that includes audited financial statements for investors. LLCs do not have the same reporting requirements that corporations must submit to their shareholders. An annual report for investors is not a legal requirement for LLCs, but some companies voluntarily create reports to attract new investors or to keep existing investors and members informed. Generally, such a report contains detailed financial information, including audited statements prepared by a certified public accountant, to let the reader know about the financial health of the company.
The IRS considers an LLC's annual income tax return to be an annual report. The type of income tax and return that the LLC files differs depending on how the particular company is organized. The IRS does not have a specific return for LLCs, but instead requires these companies to be classified as sole proprietorships, partnerships or corporations. For example, when an LLC has only one member, it files as a sole proprietorship; the income passes through the LLC and is reported on the owner's personal tax return. Most LLCs with more than one member file the return as a partnership by filing IRS Form 1065. LLCs may also elect to be treated as a corporation or S corporation for tax purposes. To do so, the LLC must file Form 8832 to let the IRS know about the classification, then submit the tax return Form 1120 or 1120-S for corporations or S corporations, respectively.
Read More: How do I Report Income From an LLC?
Elizabeth Rayne earned her J.D. from Penn State University and has been practicing law since 2009, advising clients on issues ranging from employment law to nonprofit management. For two years, she served as a contributing editor for the "Vermont Environmental Monitor."