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Can a Single-Member (like me) of an LLC file taxes as a Corporation?

Saginaw, MI |

I'm a Single Member (1 owner) of an LLC, and I need to file my LLC taxes separately so I won't file my LLC money on my personal taxes. I already have a separate bank account and a EIN for my LLC.

Attorney Answers 4

Posted

Generally speaking, tes, a Single-Member LLC may file taxes as a corporation.

This is done by filing IRS form 8832, which is the form whereby you can elect how to treat your business for tax purposes. By filing this form, and checking the right boxes, you will be electing to treat your LLC as a corporation for federal tax purposes. This, in effect creates a C corporation, which is taxed at the entity-level, and your income would get double taxed.

You can avoid this result, however, by also filing form 2553, commonly known as an S-election. This would allow your LLC to file its income on form 1120S, and, like all other S Corps and LLC's, would not be taxed at the entity-level.

To keep everything clean, I would make the 8832 effective on the first day of your next taxable year. Keep in mind that the S-election must be filed within two months and fifteen days after the start of the taxable year that it is to be effective. Assuming you file on a calendar year, this means that you should make your 8832 effective on 1/1/2013, and your deadline for making the S-election will be on 3/15/2013.

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Posted

On the surface, the answer is no. As a single member LLC, you must file a Schedule C. If you are married, you can both be owners and file a 1065 every year. The IRS will respect this as long as you do it from the beginning and split the income and expenses accordingly.

You can also make an election to be taxed as a C Corporation, or even a further election to be treated as an S-corp after doing this. An LLC can be taxed any way, but you will have to live with the decision after it is made. For instance, if you choose to be treated as a C Corp, you will always have to receive compensation in the form of wages and dividends. As an S-corp, you will always have to file an 1120S.

You should speak with a CPA in your area so you can make the right long-term choice. There could be something you are overlooking. For instance, if you are going to have early losses in the business, you will not get these operating as a C corp. There are many things to consider, and you should not make such a decision based on the limited amount of information sharing on Avvo. A CPA or Lawyer could give a lot better answer if they just had 20 minutes to ask you some specific questions relating to your situation.

Christopher Larson
Insight Law

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Posted

Why, the gain or loss from the LLC will show upon your tax return anyway. I suspect there is something else you are attempting to accomplish. See an attorney and be open and frank about what you actually are attempting and why.

To the PROSPECTIVE client, please call myself or another attorney for you choice with more detaiils and an appointment. My PRELIMINARY answer to your question(s) is for general purposes and based upon what little information you have conveyed. It is based on such limited information that the general answer should never be relied as a reason for your action or inaction. My response does NOT establish an attorney-client relationship and such may only be established by mutual agreement, and the signing of a written retainer agreement, which will generally require payment for our services, as this is what we do for a living and, just like you, we must get paid for our work.. .

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Posted

Sounds like you are letting the bookkeeping tail wag the corporate dog. As I understand it you want to keep the tax you pay on the LLC separate from the tax you pay on your other personal income. You just need to make an allocation after your 1040 is complete. Take the profit off Line 31 on Schedule C for your LLC as a percentage of your total income from line 22 of your 1040. Apply that percentage to the tax owed on line 46 to find the amount owed by the LLC. Write two checks to IRS, one on the LLC account for that amount, the other on your personal account for the balance. Send them both in with your 1040. This will prevent you from spending LLC money on your personal taxes.

DISCLAIMER—This answer is for informational purposes only under the AVVO system, its terms and conditions. It is not intended as specific legal advice regarding your question. The answer could be different if all the facts were known. This answer does not establish an attorney client relationship. I am admitted only in California. (Bryant) Keith Martin sbbizlaw.com

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