Question

LM, a domestic limited liability company (LLC), is formed in March of the current year. The...

LM, a domestic limited liability company (LLC), is formed in March of the current year. The entity has two members and does not disregard its default classification for tax purposes. What is the default classification of KLM for tax purposes?

A. Partnership.

B. Association taxed as a corporation.

C. Limited liability company.

D. Sole proprietorship

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Answer #1

Answer : Option A - Partnership

LLC, limited liability company is a hybrid of both partnership and sole proprietorship. There is no status as LLC for tax purposes(Option C is incorrect)

When LLC has one member it is classified as sole proprietorship for the tax purposes and if LLC has two or more than two members then it is classified as Partnership for tax purposes. (Option D is incorrect and Option A is correct)

LLC is not treated as association taxed as corporation for the tax purposes. (Option B is correct)

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