The federal government does not recognize an LLC as a classification for federal tax purposes. An LLC business entity must file a corporation, partnership or sole proprietorship tax return. An LLC that is not automatically classified as a corporation can file Form 8832 to elect their business entity classification. A business with at least 2 members can choose to be classified as an association taxable as a corporation or a partnership, and a business entity with a single member can choose to be classified as either an association taxable as a corporation or disregarded as an entity separate from its owner, a “disregarded entity.” Form 8832 is also filed to change the LLC’s classification.
A limited liability company (LLC) is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions. LLCs do not need to be organized for profit. Often incorrectly called a "limited liability corporation" (instead of company), it is a hybrid business entity having certain characteristics of both a corporation and a partnership or sole proprietorship (depending on how many owners there are). An LLC, although a business entity, is a type of unincorporated association and is not a corporation. The primary characteristic an LLC shares with a corporation is limited liability, and the primary characteristic it shares with a partnership is the availability of pass-through income taxation. It is often more flexible than a corporation, and it is well-suited for companies with a single owner. It is important to understand that limited liability does not imply that owners are always fully protected from personal liabilities. Courts can and sometimes will pierce the corporate veil of corporations (or LLCs) when some type of fraud or misrepresentation is involved. Limited liability company members may, in certain circumstances, also incur a personal liability in cases where distributions to members render the LLC insolvent
* Choice of tax regime. An LLC can elect to be taxed as a sole proprietor, partnership, S corporation or C corporation (as long as they would otherwise qualify for such tax treatment), providing for a great deal of flexibility. * A limited liability company with multiple members that elects to be taxed as partnership may specially allocate the members' distributive share of income, gain, loss, deduction, or credit via the company operating agreement on a basis other than the ownership percentage of each member so long as the rules contained in Treasury Regulation (26 CFR) 1.704-1 are met. S corporations may not specially allocation profits, losses and other tax items under US tax law. * Limited liability, meaning that the owners of the LLC, called "members," are protected from some or all liability for acts and debts of the LLC depending on state shield laws. * Much less administrative paperwork and record keeping than a corporation. * Pass-through taxation (i.e., no double taxation),...