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How are limited liability companies classified for federal income tax purposes?

How are limited liability companies classified for federal income tax purposes?

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Answer #1

Limited liability companies are basically a partnership but with limited liability. Further owners of a LLC can include Individuals, corporations, other LLC's etc (These owners are called mebers).

Now coming to classification, the Internal Revenue Service (IRS) will classify LLC as a corporation or partnership or part of LLC's owners tax return based on the elections made by the LLC.

Normally a domestic LLC with at least two members is classified as a partnership for federal income tax purposes, however the LLC can file Form 8832 and elect to be treated as a corporation.

Normally LLC with only one ne member is classified as an entity disregarded as separate from its owner, however the LLC can file Form 8832 and elects to be treated as a corporation.

Foreign and Domestic LLC's with more than two mebers are classified as corporation.

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