Sole Proprietor, Partnership,
Limited Liability Company/Partnership (LLC/LLP),
Corporation, Subchapter S Corporation
This is archived information that pertains only to the 2002 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
I recently formed a limited liability company (LLC). The LLC has no employees. Do I need a separate Federal Tax ID number for the LLC?
No, you will not need a separate Federal Tax ID number for the LLC if you are the sole owner of the LLC and the LLC has no, employees. If you are not the sole owner of the LLC or if the LLC has employees, you will need a separate Federal Tax ID number for the LLC.
References: - Publication 1635 (PDF), Understanding your EIN - Employer identification Number - IRS
- Form SS4 (PDF), Application for Employer Identification Number
- Form 8832 (PDF), Entity Classification Election
As a Domestic LLC (limited liability company), what forms do I use to file a return?
The form you use will depend on what kind of entity your business is for Federal tax purposes. Following are some general guidelines and the forms which go with each entity: - If your business has only one owner, it will automatically be considered to be a sole proprietorship (referred to as an entity to be disregarded as separate from its owner) unless an election is made to be treated as a corporation. A sole proprietorship files Form 1040 (PDF), U.S. Individual Income Tax Return and will include Form 1040, Schedule C (PDF), Profit or Loss from Business. If an election is made to be treated as a corporation, Form 1120 (PDF), U.S. Corporation Income Tax Return, is filed.
- If your business has two or more owners, it will automatically be considered to be a partnership unless an election is made to be treated as a corporation. A partnership files Form 1065 (PDF), U.S. Partnership Return of Income. If an election is made to be treated as a corporation, Form 1120 (PDF), U.S. Corporation Income Tax Return, is filed.
The election referred to is made by filing Form 8832 (PDF), Entity Classification Election.
References: For IRS purposes, how do I classify a limited liability company? Is it a partnership or a corporation?
A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. Unlike a partnership, none of the members of an LLC are personally liable for its debts. An LLC may be classified for Federal income tax purposes as a sole proprietorship (referred to as an entity to be disregarded as separate from its owner), partnership or a corporation. If the LLC has only one owner, it will automatically be considered to be a sole proprietorship (referred to as an entity to be disregarded as separate from its owner), unless an election is made to be treated as a corporation. If the LLC has two or more owners, it will automatically be considered to be a partnership unless an election is made to be treated as a corporation. If the LLC does not elect its classification, a default classification of partnership (multi-member LLC) or sole proprietorship (single member LLC) will apply. The election referred to is made using the Form 8832 (PDF), Entity Classification Election.
References: For federal tax purpose, is a limited liability company (LLC) with a single member (owner) treated as a partnership, corporation, or sole proprietorship?
An LLC having a single owner will be treated as a sole proprietorship unless an election is made to be treated as a corporation. The election is made using Form 8832 (PDF), Entity Classification Election.
References: - Form 8832 (PDF), Entity Classification Election
How is the IRS notified of the entity classification under the tax regulations?
Under regulations, many business entities can elect the tax entity (partnership, corporation, or disregarded entity) that best suits their needs. This approach is popularly called "check the box." Taxpayers should notify the IRS of any check-the-box election by filing Form 8832 (PDF), Entity Classification Election. If a taxpayer does not file Form 8832, a default classification will apply.
Read Reg. 301.7701-3 and Form 8832 for more information.
References: - Form 8832 (PDF), Entity Classification Election
- Reg. 301.7701-3
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