Contact Us

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.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Home
  • Law, Transactions, & Risk Management
  • Business Entities, Corporate Governance & Ownership

LLC Taxation - Explained

Partnership vs Corporate Taxation

Written by Jason Gordon

Updated at September 25th, 2021

Contact Us

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.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • 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
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Table of Contents

How is an LLC taxed?How to Choose how an LLC is taxed?When Can I Make an LLC Tax Election?How do I ask for Special Authorization to Change LLC Tax Election?Does the LLC File a Tax Return?Academic Research

How is an LLC taxed?

The members of an LLC may choose to be taxed as a partnership or a corporation.

Back To: BUSINESS ENTITIES, CORPORATE GOVERNANCE, & OWNERSHIP

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. 

Related Topics

  • 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

Academic Research



llc taxation

Was this article helpful?

Yes
No

Related Articles

  • Board Decision Making - Explained
  • Comply or Explain (UK) - Explained
  • Limited Liability Business Entities - Explained
  • Macaroni Defense (Hostile Takeover) - Explained



©2011-2021. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand