When e-filing a state SMLLC, the following federal diagnostic is generating and prevents the transmission of the state SMLLC return:
E-file: This Federal return may not be electronically filed. There are less that two partners entered for the return, and Federal single member LLC's are specifically not allowed to be e-filed. At least two K-1's are required for a Federal partnership return to be accepted via e-file. Federal single member LLC's must be paper filed. (ref. #11201).
Why is this diagnostic generating?
When validating the state return, some states (for example, CA or TX) will also validate the federal return. Because the federal return doesn't allow Form 1065 to be filed with less than two partners, this diagnostic prevents the federal validation and disrupts the validation process for the state filing.
Because the federal return isn't being filed and the SMLLC has only one member, the e-file diagnostic must be ignored in order to transmit the state return.