Limited Liability Companies may face these issues.

Form 8832

If an LLC does not File Form 8832, it will be classified, for Federal tax purposes under the default rules. The default rules provide that if the LLC has at least two members and is not required to be classified as a corporation, it will automatically default as a partnership, and be required to file a partnership return. An LLC that has only a single member and is not required to be classified as a corporation will automatically default to the classification of disregarded entity. The disregarded entity files as a sole proprietorship and completes the appropriate schedules as part of the single owners Form 1040.

Common Errors

There are two common areas where unintentional errors may occur. If you convert an existing business, such as a corporation, into an LLC there may be tax implications.

• The conversion may result in taxable gains
• Employment tax wage bases may be affected

Special rules apply when your LLC has an operating loss:

• The amount of loss you can deduct may be limited because of your limited liability for LLC debts.
• Passive Activity Loss limitation may restrict the amount of loss you can deduct.

Where to look for help:

• Tax Assistance by telephone: 1-800-829-1040
• Order forms by telephone: 1-800-829-3676
• Publication 15 Employer’s Tax Guide
• Publication 334 Tax Guide for Small Business
• Publication 541 Partnerships
• Publication 542 Corporations
• Publication 1635 Understanding Your EIN (PDF)
• Form 8832 Entity Classification Election

References/Related Topics

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