Limited Liability Company

Limited Liability Company (LLC)
A Limited Liability Company (LLC) is a business structure allowed by state statute. Each state may use different regulations, and you should check with your state ifyou are interested in starting a Limited Liability Company.
Owners of an LLC are called members. Most states do not restrict ownership, and so members may include individuals, corporations, otherLLCs and foreign entities. There is no maximum number of members. Most states also permit “single-member” LLCs, those having only one owner.
A few types of businesses generally cannot be LLCs, such asbanks and insurance companies. Check your state’s requirements and the federal tax regulations for further information. There are special rules for foreign LLCs.
Classifications
Depending onelections made by the LLC and the number of members, the IRS will treat an LLC as either a corporation, partnership, or as part of the LLC’s owner’s tax return (a “disregarded entity”). Specifically, adomestic LLC with at least two members is classified as a partnership for federal income tax purposes unless it files Form 8832 and affirmatively elects to be treated as a corporation. And an LLC with onlyone member is treated as an entity disregarded as separate from its owner for income tax purposes (but as a separate entity for purposes of employment tax and certain excise taxes), unless it filesForm 8832 and affirmatively elects to be treated as a corporation.
Effective Date of Election
An LLC that does not want to accept its default federal tax classification, or that wishes to change itsclassification, uses Form 8832, Entity Classification Election, to elect how it will be classified for federal tax purposes. Generally, an election specifying an LLC’s classification cannot take effectmore than 75 days prior to the date the election is filed, nor can it take effect later than 12 months after the date the election is filed. An LLC may be eligible for late election relief in...