Limited Liability Company (LLC) Tax Status: Corporation, Partnership or Disregarded Entity!
A Limited Liability Company (LLC) is an entity created by and subject to state statutes. Depending on elections made by the LLC, and the number of members within of the LLC, the IRS will treat an LLC either as a corporation, a partnership, or a disregarded entity to be part of the owner’s tax return. A domestic LLC with at least two (2) members is typically classified as a partnership for federal income tax purposes unless the entity files Form 8832 and elects to be treated as a corporation. For income tax purposes, an LLC with only one member is treated as a disregarded entity, unless it files Form 8832 and elects to be treated as a corporation. However, for purposes of employment tax and other taxes, an LLC with only one member is still considered a separate entity. Also, an S corporation is a corporations that elects to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes, similar to that of an LLC and or partnership. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. Your entity selection can be assessed by you and your team of trusted advisors (accountant, attorney, others) to then determine what suits your needs. Reach out to us as we can assist you with this assessment and other business, operational, and legal related matters.
DiMedio Law is a New Jersey Business, Corporate & Real Estate law firm whose practice includes business services, planning, formations, successions, wind-up & dissolution matters. Contact us at [email protected] or call us at 856-428-5577.
DISCLAIMER: This advisory is for general information purposes only. It does not constitute legal advice, and may not be used and relied upon as a substitute for legal advice regarding a specific legal issue or problem. Advice should be obtained from a qualified attorney licensed to practice in the jurisdiction where that advice is sought.