LLC Taxation - Explained
Partnership vs Corporate Taxation
If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
How is an LLC taxed?
The members of an LLC may choose to be taxed as a partnership or a corporation.
How to Choose how an LLC is taxed?
If the members do not make a formal tax election with the IRS, the default tax status is as a partnership (or, if there is only one member, the member will be taxed as sole proprietor). To be taxed as a corporation, the members must file a form 8832 "Entity Classification Election". The IRS will give notice of whether the election is accepted within 60 days.
When Can I Make an LLC Tax Election?
The members can make a tax election when the LLC is formed. If no election is made, the default rule is that the LLC will be taxed as a partnership (or sole proprietor - if only one member). The members may then make a tax election at any time. Once an election is made, the IRS will not allow the entity to change its election for a minimum of 60 months, without special authorization.
How do I ask for Special Authorization to Change LLC Tax Election?
You can contact the IRS by petitioning for a private letter ruling.
Does the LLC File a Tax Return?
Yes. But only if the LLC has more than one member or is taxed as a corporation. If the LLC is taxed as a sole proprietorship, the entity does not file a return. The sole member reports the activity of the LLC on her personal tax return.
The partnership taxes are filed on Form 1065. The corporate taxes are reported on Form 1120.
- Business Entities (Intro)
- Why is studying business entities important?
- Considerations When Forming a Business Entity
- Holistic (Detailed) Overview of Setting Up a Business Entity
- What are Business Entities?
- What is a Closely-held vs Publicly-held Business?
What are the main types of business entity?
- What are the primary characteristics of business entities?
- What is Maintenance of a business entity?
- What is Control of a business entity?
- What is Compensation of business owners?
- What is Taxation of a business entity?
- What is Sales & Use tax?
- What are payroll and self-employment taxes?
- What are the major characteristics of a Sole proprietorship?
- Uniform Partnership Act
- Uniform Limited Partnership Act
- Partnership Agreement
- At-Will Partnerships
- Responsibilities of Partners to the Partnership
- Silent Partner
- Funding the Partnership
- How are Partners Compensated
- Splitting Equity in an Industrial Partnership
- What are the main characteristics of a Limited liability partnership?
- What are the main characteristics of a Limited liability company?
- Forming an LLC
- Articles of Organization
- Operating Agreement or LLC Agreement
- Why You Need an LLC Agreement
- LLC Compensation of Members
- LLC Taxation
- Converting to an LLC
- What are the main characteristics of a Corporation
- Articles of Incorporation
- What to include in the Articles of Incorporation
- Corporate Bylaws
- Exiting the Corporation
- Dissenter's Rights
- What are the requirements to be an S Corporation?
- Non-Profit Organization
- NonProfit Business Entities
- Private Foundation
- A Detailed Explanation of the Sole Proprietorship
- Taxation of Sole Proprietorship
- A Detailed Explanation of the General Partnership
- 50/50 Partnerships: Never a Good Idea
- Publicly-Traded Partnerships
- A Detailed Explanation of the Limited Liability Company
- A Detailed Explanation of the Corporation
- Keepwell Agreement (Letter of Comfort)
- Personal Service Corporation Definition
- A Detailed Explanation of the Non-Profit Entity
- Public Limited Company (UK)