In an LLC, owners have limited personal liability for the debts and actions of LLC, similar to a corporation. The benefits of pass-through taxation and flexibility, much like a partnership, make LLCs an attractive business structure. Each state may use different regulations, and you should check with your state if you are interested in starting a Limited Liability Company. Banks, insurance companies, and non-profit organizations generally cannot be LLCs. Your state may have other restrictions. 

Electing an Entity Classification

Because the federal government does not recognize LLCs for federal taxation purposes, each LLC is classified differently depending on the LLCs structure.  In some cases, the company can request how they would like to file the return. LLCs can only be classified as a corporation, partnership or sole proprietorship.  Form 8832 is needed to classify your LLC.

References/Related Topics

• Limited Liability Company
• Single Member Limited Liability Companies
• LLC Filing as a Corporation or Partnership
• Possible Repercussions
• Forms for Limited Liability Companies