Limited Liability Company (LLC)
A flexible business structure that combines the liability protection of a corporation with the pass-through taxation and operational flexibility of a partnership.
Detailed Explanation
For tax purposes, single-member LLCs are disregarded by default and report on Schedule C of the owner's Form 1040. Multi-member LLCs default to partnership taxation and file Form 1065. LLCs can elect S corporation or C corporation tax treatment by filing Form 2553 or Form 8832. The choice between LLC and S-corp tax election often hinges on self-employment tax savings versus the administrative cost of payroll and corporate formalities.
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Learn about Entity Formation & StructuringRelated Terms
S Corporation
A pass-through tax election under Subchapter S of the Internal Revenue Code that avoids corporate double taxation while allowing shareholder-employees to reduce self-employment tax.
Partnership
A business entity owned by two or more persons who share in profits and losses, taxed as a pass-through with each partner reporting their share on their individual return.
Form 2553 (S Corporation Election)
The IRS form used to elect S corporation tax status for an eligible domestic corporation or LLC, generally due within 75 days of the start of the tax year.
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