Being able to return your invested capital is quite an accomplishment, especially in your first year. Nice job!
Before we answer your question, keep in mind that as a single member LLC you can be classified as either a disregarded entity (i.e. sole proprietor) or corporation for tax purposes BUT legally maintain LLC status.
As a disregarded entity you are treated as a sole proprietor for tax purposes and you would report income and expenses on Schedule C of your 1040 personal tax return. To be treated as a corporation you need to file Form 8832 and elect to be classified as a corp. For income tax reporting as a corp., you would be required to file tax Form 1120.
The short answer to your question is that a return of capital is not a taxable event for an LLC. More specifically, the IRS states that a non-dividend distribution in the form of a return of capital to a single member LLC is tax-free to the extent that it does not exceed the stockholder’s basis. On the flip-side, if the business had income or experienced another taxable event (i.e. sale) during the yr then you would likely be subject to income tax.
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