Question

Which of the following statements is incorrect about limited liability companies and the check-the-box regulations?

a.         If a limited liability company with more than one owner does not make an election, the entity is taxed as a partnership.

b.         All 50 states and the District of Columbia have passed laws that allow creation of limited liability companies.

c.         An entity with more than one owner and formed as a corporation cannot elect to be taxed as a partnership.

d.         If a limited liability company with one individual owner does not make an election, the entity is taxed as a corporation.

e.         A limited liability company with one owner can elect to be taxed as a corporation.

Answer 1

1) a-If a limited liability company with more than one owner does not make an election, the entity is taxed as partnership-

Correct, because if they make election, then they will be taxed based on election- partnership or corporation

b) All 50 states and the District of columbia have passed laws that allow creation of LLC- Correct

c) An entity with more than one owner and formed as a corporation cannot elect to be taxed as a partnership-In correct, as a LLC if doesnot file form Form 8832 will be treated as partnership., so it can elect to be taxed as partnership

d)  If a limited liability company with one individual owner does not make an election, the entity is taxed as a corporation.-Incorrect, as a LLC with one individual owner does not make election, can be treated as corporation or disregarded as an entity separate from its owner, and thus be taxed accordingly.

e) A limited liability company with one owner can elect to be taxed as a corporation.-Correct, as it depends on the election whether they choose as corporation or be disregarded as single entity.