Can I have an LLC with no income but expenses?

Yes, it is possible for an LLC to have no income but expenses, a common situation for new businesses. You should still file a tax return to report these expenses, which can create a net operating loss that may offset other income or be carried forward to reduce future tax liabilities.

Can an LLC deduct expenses without income?

You can either deduct or amortize start-up expenses once your business begins rather than filing business taxes with no income. If you were actively engaged in your trade or business but didn't receive income, then you should file and claim your expenses.

What happens if LLC has no income?

An LLC may be disregarded as an entity for tax purposes, or it may be taxed as a partnership or a corporation. Even if your LLC has no income, you may be legally required to file taxes. There are other reasons besides legal compliance that you may want to file a tax return for an LLC with no income.

What if I don't make money with my LLC?

If your LLC doesn't make a profit, you can report your net operating loss on your tax return to lower your taxable income. Just try to avoid operating at a loss for multiple years in a row so the IRS doesn't classify your business as a hobby. You can't deduct business expenses on your taxes for a hobby.

Can I claim business expenses if I made no money?

The CRA sees millions of tax returns every fiscal year, including thousands that reflect annual losses for businesses. For that reason, you can claim business expenses even if you earned no income, and the CRA will probably not flag your tax filings for an audit.

How to File Taxes for an LLC With No Income

What is the $2500 expense rule?

Basically, the de minimis safe harbor allows businesses to deduct in one year the cost of certain long-term property items. IRS regulations set a maximum dollar amount—$2,500, in most cases—that may be expensed as "de minimis," which is Latin for "minor" or "inconsequential." (IRS Reg. §1.263(a)-1(f) (2025).)

Can I claim business expenses if I had no income?

Yes, you can claim business expenses even if you haven't yet generated income. The ATO allows deductions for expenses incurred while setting up your business as long as the costs are directly related to the operation of the business, and you intend to make a profit.

What happens if I create an LLC and do nothing with it?

In multi-member LLCs, the IRS treats it as a partnership. Therefore, if the LLC is wholly inactive and has had no activity, you won't need to file a federal business tax return.

What is the $600 rule in the IRS?

Initially included in the American Rescue Plan Act of 2021, the lower 1099-K threshold was meant to close tax gaps by flagging more digital income. It required platforms to report any user earning $600 or more, regardless of how many transactions they had.

What is the 6 month rule in business?

The 6-month rule means, that you have to wait at least for 6 months in any business to achieve success. How will you become successful if you work on a business for 1, 2, or 3 months and then suddenly leave it because you didn't get the quick success you wanted.

How long can an LLC go without making money?

After about couple years of loss, the LLC will have to be shutdown.

Is there a minimum income for an LLC?

An LLC does not need to earn income to maintain its legal status, but it may still have tax obligations. LLCs can be taxed as pass-through entities, C corporations, or S corporations, depending on the chosen tax classification.

Will an inactive LLC affect my credit?

Difficulty in Re-establishing Credit or Business Reputation: An LLC that is not formally closed can negatively impact the business credit and reputation of the members, making it harder to start new ventures in the future.

What are the biggest tax mistakes people make?

Avoid These Common Tax Mistakes

• Not Claiming All of Your Credits and Deductions. ...
• Not Being Aware of Tax Considerations for the Military. ...
• Not Keeping Up with Your Paperwork. ...
• Not Double Checking Your Forms for Errors. ...
• Not Adhering to Filing Deadlines or Not Filing at All. ...
• Not Fixing Past Mistakes. ...
• Not Planning for Next Year.

How do you provide proof of income if you have no income?

For individuals who are unemployed but receive benefits — like unemployment insurance, disability payments, or worker's compensation — can request forms from whatever entity pays them. These forms, whether they're from the government or an insurance company, can act as proof of income.

What happens if you have an LLC but don't use it?

If you have an LLC but don't use it, it can still incur fees, penalties, and legal risks, potentially leading to suspension or administrative dissolution by the state for non-compliance (like failing to file annual reports or pay franchise taxes), even with zero income, and you must formally dissolve it to avoid ongoing obligations and protect your personal liability. Ignoring an inactive LLC means you're still responsible for its state fees (like California's $800 minimum tax), can face penalties, and risk losing the limited liability protection, potentially damaging your credit or making future business ventures difficult. 

What is the $75 rule in the IRS?

Section 1.274-5(c)(2)(iii) requires documentary evidence for any expenditure for lodging while traveling away from home and for any other expenditure of $75 or more, except for transportation charges if the documentary evidence is not readily available.

Is Venmo reported to the IRS?

Venmo reports to the IRS 1-(855)(745)(8192) if you receive payments totaling $600 or more for goods and services in a calendar year. These reports are made via Form 1099-K, which is sent to both the IRS 1-(855)(745)(8192) and the user. Personal payments like splitting bills or gifts are not reported 1-(855)(745)(8192).

What is the downside of an LLC?

The main downsides of an LLC include higher self-employment taxes compared to S-corps, difficulty attracting large outside investors (who prefer corporations), ongoing state fees, potential for dissolution if a member leaves, and rules around ownership transfer requiring member consent, plus it doesn't shield you from personal liability for your own bad acts. While flexible, it requires formal steps like annual reports, and single-member LLCs in some states have less asset protection. 

What if my business has expenses but no income?

Claiming business expenses without income is legal and accepted by the Internal Revenue Service (IRS). This practice acknowledges that businesses often incur costs before generating revenue, especially during the startup phase or in challenging economic times.

What business can I start with $0?

Can I start a business with no money? Yes. Many online business ideas, like freelance writing, social media management, or tutoring require nothing more than your skills and a laptop. These are services online with minimal startup costs, making them great entry points for anyone starting from $0.

What is the most overlooked tax break?

The 10 Most Overlooked Tax Deductions

• Out-of-pocket charitable contributions.
• Student loan interest paid by you or someone else.
• Moving expenses.
• Child and Dependent Care Credit.
• Earned Income Credit (EIC)
• State tax you paid last spring.
• Refinancing mortgage points.
• Jury pay paid to employer.

What is the $1000 instant tax deduction?

What it really is, is a tax deduction you can claim instead of your actual expenses. The $1000 deduction equates to less than $300 in tax refund dollars for an average Australian worker who clicks to claim this deduction. However, for many people, claiming the $1000 instant deduction could mean a smaller tax refund.

Is $5000 enough to start a business?

$5,000 is a realistic launch budget for many high ROI businesses. Service-based and digital models offer the lowest barriers to entry. Lean principles minimize risk and maximize learning. Lean principles help you start with less money, avoid big risks, and learn what works faster.