Q&A: Do I need to file taxes for my company that doesn’t have revenue to date?

Posted by Don W on January 29, 2010 under Business Tax Issues, Expatriate Taxes

Q: I live in Pennsylvania.  My personal taxes will be comprised of a 1099 as I was hired by an American company as a consultant for a couple months and then as a standard employee thereafter.

In September 2007, I started an LLC in Alaska that is to be taxed as a partnership.  The company has no employees and no income to date, and neither my business partner nor myself are getting paid from that company.  My business partner is a citizen of Germany but is currently a resident of Japan.  When we first set up the partnership they had mentioned that he should apply for an EIN which he has not yet done. Do you know if this is necessary? I am not sure what the requirements are for him as a foreign member.

A: Your LLC has to file an annual return by April 15th, even if it has no income.  Your partner will certainly need to get a TIN (Taxpayer ID Number). It should go on the LLC tax return and on his personal tax return.  Since he is a foreign partner there are some additional reporting requirements for the  partnership as well – Forms 8804 (PDF) and 8805 (PDF) – instructions for both are here.  This is for the LLC to report to the IRS, and withhold taxes, any income received by the foreign shareholder.  There are penalties associated with not filing these forms.

Your personal tax return is much less complicated.  Any time you have spent outside the US in 2007/2008 will determine whether or not you qualify for the Foreign Earned Income Exclusion.  If you have paid any income tax to a foreign country then you may be eligible for the Foreign Tax Credit.  If neither of these were to apply you would simply file your return like you lived in Pennsylvania.  For more information on the Exclusion and Credit please visit our Expat Tax Basics page on our main site.