A Limited Liability Company (LLC) is a form of state business entity. The IRS did not create a new tax classification for the LLC when LLCs were created by the states; instead, IRS uses existing tax entity classifications: corporation, partnership, or sole proprietor. An LLC is always classified by the IRS as one of these types of entities. Note - This guide does not include information for foreign or multi-state LLCS.

LLCs have advantages over both the corporation and the partnership forms of operating a business. The LLC’s main advantage over a general partnership is that, like the owners (shareholders) of a corporation, the owners (members) of an LLC are generally not responsible financially for the debts and obligations incurred during the LLC’s business. In addition, an LLC has the flexibility to be taxed as a partnership, sole proprietorship, or corporation.

   • Single Member LLC – Sole Proprietorship (Schedule C, E, or F)

   • Multiple Member LLC– Partnership (Form 1065)

   • Corporation - Must file IRS Form 8832

Related IRS Publications and Forms

• Form 8832 – Entity Classification Election

• Form 2553 – Election by a Small Business Corporation

• Pub 3402 - Tax Issues for Limited Liability Companies

• Pub 1635 – Understanding Your EIN Number