🔥 HIGH-INTENT: FINANCIAL STATEMENTS & REPORTING

Federal (IRS) classification and tax reporting for an LLC depend on elections and members, allowing it to be treated as a disregarded entity (single-member), partnership (multi-member), or corporation (if elected).

Tax filing obligations follow this classification, requiring forms such as Form 1040 Schedule C (disregarded/sole proprietorship), Form 1065 (partnership) with Schedule K-1, Form 1120 (C corp), or Form 1120‑S (S corp).

Solid bookkeeping and recordkeeping are emphasized by IRS guidance as foundational for correct tax filings. Regarding accounting standards, GAAP is maintained by FASB, with private-company issues addressed by the Private Company Council (PCC).

While private companies are not universally required to follow GAAP, GAAP-based statements are often necessary for lenders, investors, or buyers. AICPA SSARS governs preparation, compilation, and review engagements for nonpublic entities, differentiating between preparation (no assurance), compilation (no assurance but report issued), review (limited assurance), and audit (reasonable assurance).

Lenders and investors typically request reviewed or audited statements based on risk and loan terms. State-level compliance involves periodic filings (annual or biennial) to the Secretary of State, which typically update registered agent, principal address, and management.

Many states combine annual report filings with franchise/privilege taxes. Examples include Delaware (corporation franchise tax due March 1; LLC alternative entity tax due June 1) and Texas (annual franchise tax report due May 15).

Most states do not require full financial statements with annual reports, but some collect financial metrics for franchise tax calculation or licensing. For LLC owners, core financial statements to maintain include the balance sheet, income statement, and statement of cash flows, along with a statement of owner’s equity and supporting schedules for tax and certain lenders.

Monthly bookkeeping and monthly or quarterly management financials are recommended, with annual GAAP or tax-basis statements for tax filings and lenders. Businesses can choose between cash or accrual accounting, with GAAP using accrual.

Established accounting packages like QuickBooks, Xero, or FreshBooks are useful, along with monthly bank reconciliations and basic internal controls. Hiring a CPA for annual tax returns and for preparation/compilation/review/audit engagements is advisable depending on external requirements.

SBA and SCORE provide templates and guidance. Missing state annual reports or franchise tax filings can lead to late fees, loss of good standing, administrative dissolution, and difficulty accessing financing.

To ensure compliance and readiness, LLC owners should: Confirm their federal tax classification and file appropriate tax returns (Form 1065, 1120, 1120‑S, or Schedule C for disregarded entities). Maintain monthly bookkeeping (bank reconciliations, A/R, A/P) and produce monthly P&L and cash-flow statements.

Prepare annual tax-basis financials at a minimum; prepare GAAP statements if seeking financing, investors, or sale. Know their state(s) filing calendar, including annual/biennial reports and franchise tax due dates (e.g., Delaware, Texas, California, Florida, New York).

Ask lenders/investors if compiled/reviewed/audited statements are required and budget accordingly. Utilize SBA/SCORE templates and consider a part-time bookkeeper and annual CPA review.

Federal (IRS) classification and tax reporting for an LLC depend on elections and members, allowing it to be treated as a disregarded entity (single-member), partnership (multi-member), or corporation (if elected).

Tax filing obligations follow this classification, requiring forms such as Form 1040 Schedule C (disregarded/sole proprietorship), Form 1065 (partnership) with Schedule K-1, Form 1120 (C corp), or Form 1120‑S (S corp).

Solid bookkeeping and recordkeeping are emphasized by IRS guidance as foundational for correct tax filings. Regarding accounting standards, GAAP is maintained by FASB, with private-company issues addressed by the Private Company Council (PCC).

While private companies are not universally required to follow GAAP, GAAP-based statements are often necessary for lenders, investors, or buyers. AICPA SSARS governs preparation, compilation, and review engagements for nonpublic entities, differentiating between preparation (no assurance), compilation (no assurance but report issued), review (limited assurance), and audit (reasonable assurance).

Lenders and investors typically request reviewed or audited statements based on risk and loan terms. State-level compliance involves periodic filings (annual or biennial) to the Secretary of State, which typically update registered agent, principal address, and management.

Many states combine annual report filings with franchise/privilege taxes. Examples include Delaware (corporation franchise tax due March 1; LLC alternative entity tax due June 1) and Texas (annual franchise tax report due May 15).

Most states do not require full financial statements with annual reports, but some collect financial metrics for franchise tax calculation or licensing. For LLC owners, core financial statements to maintain include the balance sheet, income statement, and statement of cash flows, along with a statement of owner’s equity and supporting schedules for tax and certain lenders.

Monthly bookkeeping and monthly or quarterly management financials are recommended, with annual GAAP or tax-basis statements for tax filings and lenders. Businesses can choose between cash or accrual accounting, with GAAP using accrual.

Established accounting packages like QuickBooks, Xero, or FreshBooks are useful, along with monthly bank reconciliations and basic internal controls. Hiring a CPA for annual tax returns and for preparation/compilation/review/audit engagements is advisable depending on external requirements.

SBA and SCORE provide templates and guidance. Missing state annual reports or franchise tax filings can lead to late fees, loss of good standing, administrative dissolution, and difficulty accessing financing.

To ensure compliance and readiness, LLC owners should: Confirm their federal tax classification and file appropriate tax returns (Form 1065, 1120, 1120‑S, or Schedule C for disregarded entities). Maintain monthly bookkeeping (bank reconciliations, A/R, A/P) and produce monthly P&L and cash-flow statements.

Prepare annual tax-basis financials at a minimum; prepare GAAP statements if seeking financing, investors, or sale. Know their state(s) filing calendar, including annual/biennial reports and franchise tax due dates (e.g., Delaware, Texas, California, Florida, New York).

Ask lenders/investors if compiled/reviewed/audited statements are required and budget accordingly. Utilize SBA/SCORE templates and consider a part-time bookkeeper and annual CPA review.