Say you start a new partnership or corporation in October or November but don’t actually start business operations until the next calendar year. Or how about you have a business in a transition period where the is no income for the current year.
Do you have to file a tax return even though it had no income for the year?
In both cases you are most likely required to file a tax return even though the business had no income for the current year. Unfortunately, this does cause some confusion for many small business owners but in general partnerships and corporations have different standards for filing an income tax return.
I admit this is a random post but one that has been brought up more than three times to me so it must be a common concern. Personally, this happened to me last year as I helped start an S Corp that got a delayed start and had no business activity in 2014. Unfortunately, I had to file a Form 1120S with all zeros. Many of my S Corp clients find this confusing when they start a business and apply for S Corp status late in the year. To help with this I have included two nice bullet statements from the IRS website.
- A domestic partnership must file an income tax form unless it neither receives gross income nor pays or incurs any amount treated as a deduction or credit for federal tax purposes.
- A domestic corporation (including a Subchapter S corporation) must file an income tax form whether it has taxable income or not.
IRS Reference: HERE
What tax concerns do you have when you initially start your small business?