Limited Liability Companies

Question 1

What form is used by members to elect a tax classification?

Answer 1

• Form 8832, Entity Classification Election
• Multiple member LLCs can elect to be treated as a corporation or partnership
• Single member LLCs can elect to be treated as a corporation or as a disregarded entity (sole proprietorship)

Question 2

If a multiple member LLC makes no election:

Answer 2

LLC is treated as a partnership for tax purposes

Question 3

If a single member LLC makes no election:

Answer 3

The LLC is treated as a disregarded entity and its activities are reported on the individual’s tax return, using Schedule C

Question 4

Once an LLC registers its classification, how long must it wait to make a new election?

Answer 4

60 months/5 years

Question 5

What is a Certificate of Formation?

Answer 5

• It is a significant LLC document
• Required to do business in domicile state
• Filed with appropriate state authority
• Contains info about LLC, including name, business address, registered agent

Question 6

What is an Operating Agreement?

Answer 6

• It is a significant LLC document
• It’s an optional document
• Not filed with state authorities
• Used to govern LLC operations, such as voting rights, profit/loss allocations, member changes