Question

Q1: Under the check the box regulations, what entities can a single member LLC elect to be taxed as? Explain your answer

Q2: Under the check the box regulations, what entities can a multiple member LLC elect to be taxed as? Explain your answer

Answer 1

1. Like a traditional LLC, a single member LLC can elect to be taxed as a corporation. If you don't make this election, however, your single member LLC is treated as a "disregarded entity". Under the default tax classification rules, a single member LLC is treated as a disregarded entity for tax purposes unless it elects C-corporation tax status. This arrangement is common for small businesses as they often organize as a limited liability company and only have one owner. However, a single member LLC that otherwise meets the requirements laidout in the code for S-corporation election can elect S-corporation tax status at the time of formation.

2. Under check the box regulations, an MMLLC has the option of being taxed as a partnership or a corporation for income tax purposes. By default, all LLCs are classified as partnerships for federal income tax purposes, unless the members elect to be classified as a corporation.