An LLC with two or more owners does not normally file a corporate tax return. By default, the IRS treats it as a partnership, and a partnership files Form 1065. The form reports the business's income, gains, losses, deductions and credits for the year.
The partnership itself pays no federal income tax on those numbers. They are divided among the partners according to each partner's share, and each partner reports their own share on their own return. Form 1065 is how the IRS finds out what those numbers are and how they were divided.
Because the partnership owes no tax, founders often assume the form is optional, or that a year with no profit means there is nothing to send. Both assumptions cost money. The late-filing penalty is not calculated from tax owed. It is charged for every partner, for every month you are late.
What the form actually asks for
Form 1065 is an information return. The IRS describes it as the form used to report the income, gains, losses, deductions and credits from the operation of a partnership. No tax is paid at the entity level. The income passes through to the partners, and the partnership tells each partner their share on Schedule K-1, which is part of the same return.
The one case where a dormant partnership can skip it
The IRS rule is that every domestic partnership must file, unless it neither receives income nor incurs any expenditure treated as a deduction or credit for federal tax purposes. Both halves have to be true.
That carve-out is narrower than it sounds, and most founders who reach for it do not qualify. A registered agent fee, a state filing fee, bank charges, software, or startup costs are all expenditures. A company that spent anything deductible has incurred an expenditure, and so it files, even with no revenue at all. The carve-out is for an entity that did nothing whatsoever during the year.
If you are unsure which side of that line you are on, file. The return costs less than the penalty.
The deadline
Form 1065 is due on the 15th day of the third month after the partnership's tax year ends.
- If your tax year ends on 31 December, the return is due 15 March.
- If your tax year ends on 30 June, the return is due 15 September.
Most small companies use the calendar year, so 15 March is the date to write down. If the 15th falls on a Saturday, a Sunday, or a legal holiday, the return is on time if you file it on the next day that is none of those. That is why the 2025 partnership return was due on 16 March 2026.
You can get more time to file by sending Form 7004 by the regular due date. More time to file is not more time to pay anything the partners owe.
The penalty for filing late
This is the part that surprises people. The penalty for a late Form 1065 is charged per partner, per month (or part of a month), for up to 12 months. It does not depend on how much money the partnership made.
For returns required to be filed in 2026 the amount is $255 per partner per month. For returns required to be filed in 2027 it rises to $260. The IRS adjusts the figure for inflation every year, so check the current Instructions for Form 1065 rather than relying on a number you read somewhere.
Here is what that means with real arithmetic. A partnership with 5 partners files 3 months late:
$255 × 5 partners × 3 months = $3,825.
That is the bill whether the partnership earned $500,000 or nothing at all. Two things make it grow: more partners, and more months. A two-person LLC that forgets the form for a full 12 months is looking at $255 × 2 × 12, which is $6,120, for a return that reports zero income.
There is a second late cost that is easy to miss. The partnership also owes $340 for each Schedule K-1 it fails to give a partner on time, or gives with required information missing. That is charged on top of the per-partner, per-month penalty above.
The penalty can be waived if the failure was due to reasonable cause. It is not waived because the partnership had no income.
The exceptions, and what they are really about
The exceptions are the source of most of the confusion on this page, so here is what they actually say.
They belong to foreign partnerships. A foreign partnership is one that was not created or organized in the United States, or under the law of the United States or of any state. The IRS instructions give two exceptions, and both apply only to a foreign partnership that has U.S.-source income but no income effectively connected with a U.S. trade or business, which the IRS calls ECI.
Exception 1 applies to foreign partnerships that do have U.S. partners. No return is required if all of the following are true:
- The partnership had no ECI during its tax year.
- The partnership had U.S.-source income of $20,000 or less during its tax year.
- Less than 1% of any partnership item of income, gain, loss, deduction or credit was allocable in the aggregate to direct U.S. partners at any time during its tax year.
- The partnership is not a withholding foreign partnership.
Exception 2 applies to foreign partnerships with no U.S. partners. No return is required if the partnership had no ECI, had no U.S. partners at any time during its tax year, is not a withholding foreign partnership, filed all required Forms 1042 and 1042-S, and each partner's liability on the amounts those forms cover was fully satisfied by withholding at source.
Separately, a foreign partnership with neither ECI nor U.S.-source income has no Form 1065 filing requirement at all. There is nothing for it to be excused from.
Now read the first words of both exceptions again: foreign partnership. The test looks at where the partnership was formed. It does not look at where the owners live. A Wyoming LLC or a Delaware LLC is a domestic partnership no matter who owns it, so neither exception can ever apply to it.
🇺🇸 If the IRS counts you as a U.S. person
If you are a partner in a U.S.-formed partnership, the partnership files Form 1065. There is nothing to decide.
Your presence as a partner also affects the exceptions above, though not in the blunt way it is often described. Say the partnership was formed abroad and has U.S.-source income. A U.S. partner rules out Exception 2 straight away, because that one requires no U.S. partners at any time. Exception 1 can still be available, but only if the partnership's U.S.-source income is $20,000 or less and less than 1% of any partnership item is allocable in the aggregate to direct U.S. partners. A U.S. partner holding 1% or more therefore closes both doors. A very small U.S. partner in a very small foreign partnership does not.
If that foreign partnership has no U.S.-source income and no ECI, it has no Form 1065 duty in the first place, and your being a partner does not create one.
Two practical points follow from the pass-through structure:
- You are given a Schedule K-1 showing your share of the partnership's income, deductions and credits. You use it to fill in your own return.
- Your share is yours whether or not the partnership paid you anything. Pass-through means the income is allocated to you on paper. It does not mean cash arrived in your bank account. Partners in a profitable business that reinvested everything can still have tax to pay.
The deadline and the penalty above apply to you in exactly the same way as to a non-resident partner.
🌏 If it does not
Where you live does not change what your U.S. company has to do.
If you and your co-owner both live outside the United States, and your LLC is registered in Wyoming, Delaware, or any other state, that LLC is a domestic partnership. It files Form 1065 by the 15th day of the third month after its tax year ends, and it faces the same per-partner, per-month penalty if it does not.
The mistake to avoid is reading "foreign partnership exception" as "exception for foreign owners." It is not that. Both exceptions are for partnerships formed outside the United States. Your state-registered LLC was formed inside the United States, so neither is available to it, no matter where you sit.
One more thing worth knowing, because it decides which form you are even looking at:
- One owner, non-resident: the LLC is disregarded for tax. You do not file Form 1065. You file Form 5472 with a pro forma Form 1120. That is a different page in this guide.
- Two or more owners: the LLC is a partnership by default. Form 1065 applies.
So adding a second owner to a single-member LLC changes which return the company owes. Founders who bring in a co-founder mid-year often miss this, and they miss it in a year when they had no revenue to remind them.
What is the same, and what is not
Most of this page is the same for both lanes. That is worth seeing directly.
| 🇺🇸 U.S. person | 🌏 Not a U.S. person | |
|---|---|---|
| Does your U.S.-formed, multi-owner LLC file Form 1065? | Yes | Yes. Same duty |
| Deadline | 15th day of the 3rd month after the tax year ends | The same date |
| Late-filing penalty | Per partner, per month, up to 12 months | The same penalty |
| Does a year with no income excuse you? | Only if it also had no expenditures treated as deductions or credits | The same narrow carve-out |
| What the partnership gives each partner | Schedule K-1 | Schedule K-1 |
| If the partnership were instead formed abroad, could an exception apply? | Only if it has no ECI, its U.S.-source income is $20,000 or less, and under 1% is allocable to direct U.S. partners | Yes, if it has no ECI, no U.S. partners at any time, and the withholding conditions are met |
Five of the six rows are identical. The filing duty for a U.S.-formed partnership does not depend on where its owners live. The only row that splits is the last one, and that row is not about your LLC at all. It is about partnerships formed outside the United States, which is what the exceptions were written for.
Common mistakes
🇺🇸 If the IRS counts you as a U.S. person
- Skipping the return in a year with no profit. The penalty is not a percentage of tax owed, so a zero year is not a free year.
- Using the personal filing date from memory. The partnership return is due on the 15th day of the third month after the year ends, which is earlier than the date most people have in their head.
- Forgetting that the penalty multiplies by the number of partners. Bringing in three more partners makes a late return four times as expensive.
🌏 If it does not
- Reading "foreign partnership exception" as an exception for foreign owners. Both exceptions are for partnerships formed outside the United States.
- Assuming that no U.S. customers and no U.S. income means no filing. A partnership formed in a U.S. state files anyway, unless it had no income and no deductible expenditure at all, which is rare once you are paying a registered agent.
- Adding a co-founder to a single-member LLC and not noticing that the company now owes a different return. Form 5472 with a pro forma 1120 was the single-owner path. Two owners means Form 1065.
FAQ
My LLC has two owners and made no money last year. Do we still file Form 1065?
Almost certainly yes. A domestic partnership is excused only if it neither received income nor incurred any expenditure treated as a deduction or credit. If you paid a registered agent, a state fee, or any other deductible cost, you incurred an expenditure and you file. The late-filing penalty is charged per partner per month regardless of income, so a year with no revenue is not a free year.
When is Form 1065 due?
On the 15th day of the third month after the partnership's tax year ends. For a calendar-year partnership, that is 15 March.
What does it cost to file Form 1065 late?
The penalty is charged for each partner, for each month or part of a month you are late, for up to 12 months. For returns required to be filed in 2026 the amount is $255 per partner per month, rising to $260 for returns required to be filed in 2027. The IRS adjusts it for inflation each year. A five-partner partnership that files three months late is looking at $255 × 5 × 3 = $3,825. A further $340 applies for each Schedule K-1 not furnished to a partner on time.
Does the partnership pay tax on Form 1065?
No. The partnership reports the numbers and pays no federal income tax on them at the entity level. The income, deductions and credits are divided among the partners, and each partner reports their share on their own return.
My partner and I both live outside the United States. Our LLC is in Wyoming. Do we file?
Yes. The LLC was formed in a U.S. state, so it is a domestic partnership. The exceptions in the rules are for partnerships formed outside the United States, not for owners who live outside it.
What are the foreign partnership exceptions, then?
There are two, and both are for a partnership formed outside the United States that has U.S.-source income but no income effectively connected with a U.S. trade or business. The first is available even if the partnership has U.S. partners, provided its U.S.-source income is $20,000 or less and less than 1% of any partnership item is allocable in the aggregate to direct U.S. partners. The second requires no U.S. partners at any time, plus filed Forms 1042 and 1042-S and full satisfaction of the withholding tax. Neither exception is available to a withholding foreign partnership. Check the IRS instructions before relying on either.
A foreign partnership with no U.S.-source income and no effectively connected income does not need an exception, because it has no Form 1065 filing requirement to begin with.
I am the only owner of my LLC. Do I file Form 1065?
No. A single-member LLC is disregarded for federal tax by default, so there is no partnership return. If you are not a U.S. person, the LLC files Form 5472 together with a pro forma Form 1120 instead.
Does filing Form 1065 mean I personally owe U.S. tax?
Not by itself. Form 1065 reports the partnership's numbers and divides them among the partners. Whether you personally owe U.S. tax on your share depends on your own status and on whether that income is connected to a U.S. trade or business. Those are separate questions with their own pages in this guide.