Filing taxes without an LLC means you are a sole proprietor. You report business income and expenses on Schedule C (Profit or Loss from Business) alongside your personal Form 1040 return. If your net earnings are $ 400 $ 4 0 0 or more, you must also file Schedule SE to calculate self-employment tax for Social Security and Medicare.
To file your annual income tax return, you will need to use Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship), to report any income or loss from a business you operated or profession you practiced as a sole proprietor, or gig work performed.
The IRS mostly ignores LLCs for tax purposes and considers two or more people or businesses working together in a trade or business to be a partnership for tax purposes. However, if you are the sole owner of an LLC, then the IRS "disregards" your LLC and considers you a sole proprietor.
All corporations are required to file a corporate tax return, even if they do not have any income. If an LLC has elected to be treated as a corporation for tax purposes, it must file a federal income tax return even if the LLC did not engage in any business during the year.
An LLC isn't required to start a small business. If you're mowing lawns for money or selling carrots at your local farmer's market, you're already in business as a sole proprietor. If you bring on a business partner, you're doing business as a general partnership.
An LLC offers benefits such as personal liability protection and potential tax advantages, but it is not the only option available. Many entrepreneurs begin as sole proprietors or partnerships. These may be simpler to establish but come with different legal and financial considerations.
When deciding between a single-member LLC and a sole-proprietorship, focus on the needs of your business. As an entrepreneur testing the waters, a sole proprietorship may be an easy and cost-effective option, while a fast-growing business that needs funding would be better suited to an LLC.
LLC owners can avoid paying employment taxes by making a corporate tax election with the IRS. The members of an LLC can elect to have the company be treated as a C-Corporation (C-Corp) or an S-Corporation (S-Corp) depending on which structure provides the biggest advantage to the business.
Independent contractors don't need a license to operate in the state of California, but they may have other requirements based on where they build their business. Still others will vary based on the kind of work you do.
Raising Capital Is More Difficult to Through an LLC
LLC agreements are more difficult and complex to prepare than their corporate counterparts. Additionally, you can hit upon sticky and highly complex tax issues in the LLC context that just don't exist or arise in the corporate context.
Four common tax errors that can be costly for small businesses
An LLC offers limited liability protection, meaning personal assets are not at risk for business debts. It's ideal to form an LLC when your business income increases, you have multiple partners, or you want to separate personal and business finances.
Any sole proprietorship is required to pay taxes on additional income of $400 or more from your side hustle, freelance gig or other independent work. But if you start making closer to $40,000, you might consider forming an LLC.
Operating without a license may result in fines, closures, lawsuits, and damage to your business reputation. Registration can protect personal assets, enhance credibility, and ensure compliance with tax and licensing laws. States and industries have varying requirements for registration and licensing.
At a glance
The minimum income amount to file taxes depends on your filing status and age. For 2025, the minimum income for Single filing status for filers under age 65 is $15,750 . If your income is below that threshold, you generally do not need to file a federal tax return.
You would use the standard Form 1040 to file. Since you didn't earn any income for the year, you'll enter a “0” in each blank on the 1040. Your total income will also be “0.”
An individual whose sole income has been subjected to final withholding tax pursuant to Sec. 57 (A) of the Tax Code, or who is exempt from income tax pursuant to the Tax Code and other laws, is not required to file an income tax return.