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FAQ

On Form 8832, question 5, do I write the names with SSNs or the LLC with EIN,or neither?
I apologizing ahead of time here for my posting to follow. I really don’t haveanything against you personally but rather against your “Type”. SOAPBOX mode on. This fact that you are asking this question is indicative of the “mentality”of many “startups”. You do not know what you do not know and you try to “DO ITYOURSELF” without proper guidance. These seemingly simple questions that youare asking WILL have ramifications on how your business entity is taxed in thefuture and how your personal return will be affected in the future. Thepersonal and financial goals and objectives of both yourself and your businessassociate as well as the goals and objectives of the business MUST beconsidered before you can make the selection between a partnership and aCorporation or if an S election should be made. This conversation I have withany potential client and takes anywhere from 30 minutes to two hours. Thereare too many pros and cons to each of the three yes 3 not just the two you’vementioned to address in this forum. Seek yee competent professional advice. SOAPBOX mode off That said ‡ if you “conducted” business last year 2021 then this should havebeen addressed when the entity was formed. If you elect corporation then thetax return is due on the 15th day of the third month after the year end. March15th for a December year end note you do not necessarily have to be aDecember year end. If you select partnership then the return is due April15th. If activity occurred in 2021 make whatever uninformed choice you may. Ifyou select partnership neither box 4 or box 5 should be filled in. Now if activity did not start until 2021 STOP ‡ DO NOTHING follow the advicein my soapbox mode. Do not expect to be able to make an appointment with aqualified CPA until after 415. I hope I have helped somewhat. Again I apologize.
Should Late Election Relief under IRS Form 8832 still be sought if the entityis only making an initial classification, and not a change in the currentclassification?
An 8832 Form is only needed if the entity does not wish to accept the defaultclassification as follows Single Owner LLCDisregarded Entity MultiOwner LLCPartnership CorporationC Corporation although as a general rule S corporation is the only other option for a new Corporation and you make that election on Form 2553 and do NOT file an 8832 If the entity wishes to be something other than the above default taxclassification then you have 2 12 months from the date of formation to makethe election. If you did not make your election within that 2.5 month window then you willhave to seek relief for the late election.
Is there any benefit for an LLC to classify itself as a Corporation (asopposed to a Partnership) under form 8832?
If the business is an operating business and if you elected S corporationstatus you may be able to reduce payroll taxes and the additional ObamaCareMedicare tax. If the business is an investment entity like the ownership ofrental properties the LLC gives more flexibility and isnt burdened with thepayroll tax issues. The answer is simple and complex generally operatingcompanies are best as S corporations and investment companies are best asLLCs. However always discuss with your attorney or CPA.
Can a single-member LLC (by default, a disregarded entity) elect to be taxedas a corporation via IRS Form 8832?
Yes a singlemember LLC may elect to be taxed as a corporaiton by filing Form8832. Quoting the last sentence of the first paragraph on the IRS page at SingleMember Limited Liability Companies And an LLC with only one member is treated as an entity disregarded asseparate from its owner for income tax purposes but as a separate entity forpurposes of employment tax and certain excise taxes unless it files Form8832 and affirmatively elects to be treated as a corporation.This answer is not a substitute for professional legal advice....
Are there any good reasons to set up a "US LLC filing as a C-Corporation (Form8832)", rather than simply setting up an actual "US C-Corporation"?
Dont get confused with the difference between entity formation and taxationof that entity. The formation of entities is done at a state level and thechoices are many. The taxation of an entity is done through declaration to theIRS which removes any confusion between the intent of ambiguous entitiessuch as LLCs. You actually wont be able to set up a US anything. You have to pick a stateto set up the entity and for this you really should get some help from youradvisor. It sounds like you are from outside of the US.
Can a single-member LLC elect to be treated as a corporation by filing Form8832 and pay the corporate tax rate of 21%?
Of course it can.That’s what Form 8832 Entity Classification Election is for.And now that the corporate tax rate has been reduced from 37 to 21 moreSingle Member LLCs are choosing to do that.They set their salary equal to the anticipated profits of the business and ineffect reduce the profit to zero and pay no corporate taxes.Of course the better choice might be for the LLC to file Form 2553 and electto be treated for tax purposes as an S Corp then set a salary of about onethird of the anticipated profits and the remaining twothirds drops throughas taxable income but not subject to the SelfEmployment tax of 15.3.And if the LLC is operating a rental real estate business the SMLLC can justfile no election be classified as a Disregarded Entity for tax purposes andall of the income will be considered passive income and not subject to the15.3 SE tax.The LLC is the best of all of the Business Entities for liability protectionand for tax planning depending on your situation.I hope this helps.Michael Lantrip Attorney Accountant InvestorMichael Lantrip
Tax Law: May a single member LLC use Form 1065 and Schedule K-1 instead ofSchedule C?
No you cannot file a singlemember LLC as a partnership. The only option thatyou have in this case is to make an election to be treated as a associationtaxable as a corporation by filing Form 8832 and then you can elect to betreated as either an Scorporation by also filing Form 2553. See LimitedLiability Company LLC on the IRS Web site.