Can a sole proprietor form as a single-member limited liability company (LLC)? If so, how would such an LLC be taxed?
Can a sole proprietor form as a single-member limited liability company (LLC)? If so, how would such an LLC be taxed?
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter12: Corporations: Organization, Capital Structure, And Operating Rules
Section: Chapter Questions
Problem 11P
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- Can a sole proprietor form as a single-member limited liability company (LLC)? If so, how would such an LLC be taxed?
- Under the check-the-box Regulations, an unincorporated entity with only one owner can file as an LLC and would be classified as a disregarded entity. LLC’s do not typically pay federal income taxes, but the LLC would need to report and pay employment and excise taxes.
Expert Solution
Step 1
Internal Revenue Service has classified the businesses as :
- Sole proprietorship
- S corporation
- C corporation
Each of them has eligibility for different type of deductions and exemptions and different return submission requirements and related relaxations.
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