Do I Have to File a Tax Return for My LLC if There Was No Income?

This is a real case work story (with identifying details removed), not legal or tax advice. Filing requirements and entity elections are technical and fact-specific. Always confirm your own situation with current IRS guidance and a qualified professional.

The question: “Did I mess up by not filing 2023 and 2024 returns?”

On our first call, she laid it out like this:

• She formed a new multi-member LLC in 2023 for a startup.
• She did not file an S corporation election (Form 2553).
• She did not file any federal returns for the LLC for 2023 or 2024.
• The business was effectively on the shelf: no operations, no income, no expenses.
• The actual opening — real operations, revenue, expenses — started in the summer of 2025.
• She now wants to be treated as an S corporation going forward and was worried about:
  • Late-filed 1120-S returns for 2023 and 2024,
  • Late filing penalties, and
  • How a late S election would even work.

Her question to me was: “Do I need to go back and file zero returns for 2023 and 2024 and then deal with penalties and late S election relief, or is there a cleaner way?”

Step 1 – Clarifying what the LLC actually is for tax purposes

We started with the basics. For federal tax purposes:

• An LLC doesn’t come “pre-loaded” as a corporation, partnership, or sole proprietorship.
• Its classification depends on:
  • How many members it has, and
  • Whether it has made an entity classification election (for example, by filing Form 2553 to be treated as an S corporation).

In her case:

• The LLC had more than one member — so by default it would be treated as a partnership for federal tax purposes.
• She had not filed Form 2553 or any other election to be treated as a corporation.
• She had not filed any partnership returns (Form 1065) either.

So on paper, this was a default multi-member LLC that hadn’t yet chosen a different tax identity — and also hadn’t really started doing anything.

Step 2 – Did the LLC have a filing requirement with no activity?

The key follow-up question: Was there any income, deduction, or credit for federal tax purposes in 2023 or 2024?

After we went line by line through what actually happened, the answer was:

• No bank account activity tied to the LLC,
• No sales,
• No expenses, and
• No capital contributions that turned into deductible items.

In other words: the LLC existed on paper, but it had no income, no deductions, and no credits for those years.

For a multi-member LLC taxed as a partnership, there is a key rule that says a partnership that has no income, deductions, or credits for a taxable year is not required to file a partnership return for that year.

Step 3 – Why I pushed back on filing “zero” 1120-S returns

Her original thought (and what she’d heard from others) was:

• File late 1120-S returns for 2023 and 2024 (even if zero),
• Try to get one-time penalty abatement, and
• File a late S election to “backdate” S-corp status to 2023.

I asked her a simple question: “Why would we file an 1120-S for an activity that isn’t actually an S corporation yet and hasn’t even started operating?”

At that point:

• The LLC had never elected to be taxed as a corporation.
• No corporate activity (like payroll or formal S-corp distributions) had happened.
• There was no real business operation in those years.

Filing zero 1120-S returns for 2023 and 2024 would:

• Create a paper trail suggesting the LLC was an S corporation in those years,
• Bring late-filing penalties into play for returns that didn’t actually need to exist, and
• Require us to do extra work to “fix” a classification history that didn’t have to be that complicated.

So my answer was: stop trying to back-file 1120-S returns for years before the business existed in reality.

Step 4 – Aligning the S election with when the business actually starts

Next, we shifted the conversation from “How do I fix 2023–2024?” to “When does this business truly start for tax purposes, and how do we line up the S election with that?”

I asked:

• When did you actually open the doors?
• When did you first have real revenue and expenses?
• When (if ever) did you start treating this like an S corp — for example, paying yourself reasonable compensation through payroll?

Her answer: operations really began in the summer of 2025. That’s when revenue, expenses, and actual business activity started.

That opened up a cleaner path:

• Treat 2023 and 2024 as no-activity years for the LLC — no returns required, because there was truly nothing to report.
• Use a late S election (Form 2553 with the appropriate explanation and relief request) to elect S-corp status starting with the year the business actually begins — for example, aligning with 2025 when operations start.
• File the first 1120-S for the year the S election is intended to begin (that first real operating year), not for the prior “shelf” years.

Step 5 – What about penalties for “not filing” 2023–2024 returns?

Her biggest fear was that the IRS would punish her for not filing returns in 2023 and 2024 just because the LLC paperwork existed.

I explained the distinction:

• If an entity has a filing requirement (because it has income, deductions, or credits) and simply doesn’t file, you’re in late-filing penalty territory.
• If an entity has no filing requirement for a year because there truly was no income, deductions, or credits, there’s simply no return due — and no late-filing penalty on a return that wasn’t required.

In her situation:

• 2023 and 2024 were genuinely no-activity years.
• No prior-year S-corp returns had been filed that we were contradicting.
• We weren’t trying to pretend an S-corp existed in years when it didn’t.

So instead of burning time and money filing zero returns and then begging for penalty relief, the answer was:

Step 6 – The plan we put in place going forward

Here’s how we left it:

• We documented that 2023 and 2024 were no-activity years for the LLC — effectively, the business was on the shelf.
• We agreed that:
  • We would not file 1120-S returns for 2023 and 2024, and
  • We would not try to “backdate” S-corp status into those years.
• We planned a late S election tied to the first year of real operations, aligning the S-corp treatment with when the business actually started earning money and paying expenses.
• We talked through the importance of:
  • Setting up proper payroll once S-corp status is in effect, and
  • Keeping clean books from the first active year forward.

By the end of our work together, her original question:

• “Do I have to file 2023 and 2024 LLC tax returns with zero income, and am I in trouble for not filing?”

turned into a much calmer realization:

• “My LLC didn’t have a filing requirement for the shelf years, so I’m not behind on returns that never needed to be filed — and we can start clean with an S election when the business actually begins.”