Maybe I did not write this clearly. 

The LLC in question (lets call this LLC A) is a SME. 

The owner LLC (call it LLC B) has multiple members. thus they file 1065 as a default. 

So LLC A doesn't have to file any 1065 because having only one member/owner, they are exempt, or whatever, from such requirement. 

LLC B has to file because they have several members. 

Hopefully this is clear now. sorry for the confusion.