Our LLC start-up wants to file taxes as a corporation. How difficult will filing be?

Question

Our two member LLC is choosing to file our federal taxes as a corporation. I understand that we have to file form 8832 to declare that we will not be filing as a partnership. Can we simply file form 1120. What tax schedule will we follow?

I am looking for answers from LLC members with experience in this matter or answers from educated tax professionals.

Please don't tell me to look at irs.gov

Thanks.

We don't want to file as s-corp because profits and losses pass through back to the members, so we would be filing as c-corp.

Answer 1

You can do what you are talking about but it will be expensive. The first dollar of profit is taxed as a C corp, where a partnership or S corp flows to the individual and you can take advantage of exemptions and the standard or itemized duductions.

You really need to talk to a CPA or Enrolled Agent about this. You are correct the IRS will not give tax advise. They will answer you questions if you know the right questions to ask.

You probably will not pay less in taxes by incorporating, you might be able to take advantage of limited liability, but only liability your employees cause not for you or your partner.

Answer 2

LLC = Ltd Liability Company 2 or more members default to a partnership 1 is a SMLLC (single member LLC) which is defaulted to a sole proprietorship. Not many states recognize LLC's as a partnership but as a corporation, even IF you file as a partnership for the FEDERAL return. You must check with your state on how it recognizes LLCs! Basically, you get the liability protection of a corporation but without the paperwork and headaches of setting up a corporation and don't have to issue stock. You can form an LLC without a lawyer or accountant but you should get a tax professional to read the document to make sure it's proper. Then file with your state the incorporation papers and get a Federal ID number for your LLC. You can "elect" to be a corporation but why choose an LLC in the first place? It's because people don't know better or you plan to change partners so that 50% of the capital/profits change which will end the partnership. Hence, the LLC's election to be a corporation! This is too complicated to be answered here at a forum. You should seek a local tax professional to assist you!

Answer 3

It sounds to me like you already have a LLC with two members or owners.
In the first place, if you want to be a corporation, you should dissolve the LLC and form a corporation.
Second place, if you file as a LLC partnership, you'd use form 1065, and you'd pay less tax overall than if you have a C corp, and the same tax as if you had a S corp.
As said above, it sounds like you should seek some professional help.
If you file form 8832, then you use form 1120 to file your corporation tax return.

Answer 4

I would highly suggest that you invest some consultation time with a financial planner and tax pro. Forming an LLC and opting to be taxed as a C-Corp may NOT be in your best interests. You WILL pay higher taxes that way, both at the state and federal level in nearly all cases.

Corporate income taxes are levied on the first dollar of profit unlike income from a sole proprietorship or partnership. And corps pay higher total payroll taxes than sole proprietors or partnerships since the payroll taxes are levied on 92.35% of net profit for sole proprietors or partners but 100% of wages paid by corps.

If you are looking at paying yourselves considerably less than the total profit from the venture and building up capital for further expansion then a C-Corp may make sense. However if you're looking to line your pockets with as much cash as possible through wages paid by the corp then it may not make fiscal sense to go that route.

Additionally many businesses will lose money in the early years. If you are a sole proprietor or a partnership you can deduct those losses from your other income. If you form a corp there is no such deduction. Nor will you get any deduction for the personal funds you plow into the corp to keep it going early on.

Also keep in mind that most states levy minimun excise taxes on LLCs and corps regardless of any taxable income generated. In CA you'll shell out $800 per year even if you have no business activity whatsoever. Again, you'll get no personal writeoff or deduction for those taxes & fees.

The only reason to form an LLC or corp is to shield personal assets from business liability. Unless you are undertaking an otherwise risky venture you'll often get better protection from a good business liability policy than an LLC or corp. In a low-risk venture it may well cost less than the additional fees and taxes levied on corps. (And even an LLC or corp won't shield you from personal liability for malfeasance. Ask any doctor who has been successfully sued for malpractice how much good his LLC, LLP or P-Corp did to shield his personal assets for personal malpractice claims. The surgeon was the one with the scalpel in his hand, NOT the legal entity!)

There are so many unanswered questions in your post that it's not possible to give a definitive answer. You really do need to consult with the experts before proceeding.

Answer 5

IRS.GOV is your best place for the answer.

You'll need to elect to file as an S-Corp, form 2553.

Taxes will then be filed under form 1120S.

If I were you, I wouldn't depend on people's opinions when it comes to running a business considering fines and penalties may range into the thousands and haunt you for years to come, and I do mean that with 100% honesty.

Seek experienced professionals unless you want to do a lot of reading on your own. I own an S-Corp, I did everything on my own, but I spent a lot of time reading dry, long, boring IRS documents and laws. We're talking hundreds of hours to become familiar with things that ONLY applied to my business. I started my business 12 years ago.

Answer 6

Subchapter S- corp or C- corp? It's not difficult at all.