LLC TAX STRATEGIES

Limited Liability Company LLC Tax Strategies

Tax Tips for the Small Business Owner

IRS rules permit the owners of the LLC to decide how it will be taxed. An LLC can be taxed as a pass-through entity or as a C corporation. 

Most owners opt for the pass-through entity. The LLC is not taxed, instead profits and losses are passed through to the individual members’ tax return. This is the same as for a sole proprietorship, S corporation, or partnership. If the LLC has two or more members, it must file the same tax form used by a partnership – Form 1065, U.S. Return of Partnership Income. The LLC must also prepare and distribute a Schedule K-1 form showing the members’ individual allocations. 

If the LLC has only one member, then the IRS treats it as a sole proprietorship for tax purposes and profits and losses are reported on the sole member’s Schedule C. 

Changing Your Tax Treatment for LLC Tax Strategies

The LLC may change it’s tax treatment at any time by making an election with IRS Form 8832. Once you file the form your LLC will be treated by the IRS as a C corporation for tax purposes.

see IRS Form 8832 PDF (IRS Website)

LLC Tax Strategies