A multi-member LLC is a popular form of business in the United States when two or more people wish to do business together.
Every LLC with more than one owner is a multi-member LLC. By default, a multi-member is treated as partnership for tax purposes, though it can elect to be taxed as a corporation. The partnership tax return is Form 1065.
A multi-member LLC treated as a partnership is what is known as a pass-through entity, meaning that, for income tax purposes, the entity pays no income taxes. If there is taxable income in the U.S., non-resident owners will need to file Form 1040-NR to pay taxes on that income.
Filing Form 1040-NR requires an Individual Taxpayer Identification Number, or ITIN, and obtaining one can be a long process. Because of this and other reasons, many multi-member LLC owners choose to file an election using Form 8832 for the LLC to be treated as a corporation. If this is done, the LLC will file Form 1120 and pay its own taxes at a 21% rate.
We provide many of the services needed to operate a multi-member LLC legally in the United States:
Formation – We can form your LLC in any state. New Mexico, Wyoming, and Delaware are the most popular states for non-residents.
Form 1065 and K-1s – Form 1065 is required for all multi-member LLCs unless an election has been made for the LLC to be taxed as a corporation. Form 1065 may not be needed for a year if business operations have not yet begun. We are often asked if our Form 1065 preparation includes the K-1s. The K-1s are an integral part of the Form 1065 filing, and Form 1065 cannot be properly completed without them. Form 1065 is due by March 15th of each year.
Form 1040-NR – Form 1040-NR is the U.S. personal tax return for a non-resident. This form can be needed in other situations, but for our clients, it is required when their U.S.-based LLC is “engaged in trade or business within the United States” (ETBUS). It is also possible to file Form 1040-NR as a “protective return.” A protective return preserves your right to claim deductions if the IRS ever decides you were ETBUS when you believed you were not. If required, Form 1040-NR is due by April 15th of each year.
ITIN Applications – ITINs are not necessarily required for a multi-member LLC owner, but it is customary to get them. If the LLC is ETBUS, then an ITIN will be required as a Form 1040-NR will need to be filed by each owner. Many clients choose to obtain an ITIN even if not required.
FBAR/Form 114 – The FBAR, or Form 114, is a form required when a U.S. person has a financial interest, signatory authority, or other authority over an account outside of the United States and the aggregate value of all foreign financial accounts exceeded $10,000 USD at any time during the calendar year. If required, the FBAR is due by April 15th of each year.
CTA/BOI Changes – The Corporate Transparency Act requires Beneficial Ownership reporting as of January 1st, 2024. These reports are due within 30 days of forming the LLC and then within 30 days of any change to the information. For LLCs formed before 2024, the initial filing is due by the end of 2024.
State Annual Reports – Of the states popular with non-residents, only New Mexico does not require some type of annual report, annual fee, or franchise tax.
Amendments/Address Changes – Changing certain information about your LLC after filing Articles of Organization will require filing an amendment. What changes require an amendment varies by state.
Form W-9 – A payor may request that your multi-member LLC complete Form W-9. This is common and appropriate.
Form 1099 – A multi-member LLC may be required to issue a Form 1099 to any U.S. person it pays.
Sales Tax – Sales tax is a complicated topic as each state has its own laws. It is important to know that the rules for sales tax are different from income tax and an LLC with no income tax obligations can still have sales tax obligations.
Dissolution – The process for dissolution varies by state. It is important to know that any IRS requirements must still be met in the year of dissolution.
The forms mentioned here cover what is needed by most clients and more. However, there may be situations that require other types of forms.