A 2 Member LLC was set up by our client as they travel around the country and dance. According to the LLC members, they feel their income ceiling is around $25,000 per year, if they do well. They have been dancing for many years as a fun hobby; this is a husband/wife thing. This year, $900 1099 received with expenses of $200,000+. They expect to NEVER have a profit. My understanding is that if there will NEVER be a potential for a profit, we deduct expenses to the extent of the income only. An LLC could be the chassis should they wish to file a 1065, but in reality, a Sch C would better serve the purpose. I have no comfort in filing a 1065 with a $200,000 expense against a $900 income when the taxpayer's have told me, in writing that they will NEVER turn a profit. I feel silly for even posting this but am looking to see if I am looking at this wrong, opinions or reference material please.