LLC Tax Reporting The first year of the company
Steven Palmieri, a Tax CFO and the Entrepreneur's CFO, treats the first year as a naming problem first, then as a return.
See the first year
Formation is not a change.
An election that takes effect on the date the company was formed is not a change away from an earlier classification. There was no earlier federal classification to leave. That distinction matters because a later change is generally barred for 60 months, and people import that bar into a brand new company where it does not belong. We write the formation date next to the effective date and see whether they are the same day.
If no election is made, the first year is the default. One owner, the owner's return. Two or more owners, the partnership return. The first year is not a free year. The same reports exist. They are simply short.
The window on a new election.
An election generally cannot take effect more than 75 days before it is filed, and it generally cannot take effect more than 12 months after the filing. A company that has already been operating for a long stretch cannot casually backdate a choice to opening day. Late relief exists. We do not restate the relief steps on this page. We will say, on the call, whether the sheet in front of us is an ordinary election or a late request.
A late request stays in the file as a late request. We will not cover it with the formation paper and call the year ordinary. The two sheets answer different questions. One says when the company began. The other says when the classification was asked for.
Books that start in the middle of a month.
The first close starts on the formation date, not on the first of a convenient month, unless the activity truly started later. Opening balances are usually cash in, and money the owner contributed. We label that contribution on the day it happens. A year of unlabeled transfers is how a first return loses a week.
Payroll setup, if anyone is paid, happens before the first payday, with a provider you run. We can open that account and write down the work. We do not run the cycle. Vendor forms start in the first year too. Collect the vendor form before the payment when you can. This page names no dollar cutoff.
Sheets for the first call.
Bring the formation paper, the number assignment, any election you mailed, and a download of the bank from opening day. If nothing was mailed, say so. The default is a complete answer. We would rather name it than wait for an election you do not actually want.
Estimates may already be due if the company started early in the year and profit is landing on an owner's return. The four dates do not wait for a first return to be prepared in March. If profit is real, the voucher belongs on the calendar now, in the name of the person who will actually owe the tax.
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