An LLC is a legal entity only and must choose to pay tax either as an S Corp, C Corp, Partnership, or Sole Proprietorship. Therefore, for tax purposes, an LLC can be an S Corp, so there is really no difference.
How do I know if my LLC is an S-Corp or C-corp?
Check with the IRS Call the IRS Business Assistance Line at 800-829-4933. The IRS can review your business file to see if your company is a C corporation or S corporation based on any elections you may have made and the type of income tax returns you file.
How is a LLC taxed as a C Corp?
Unlike an LLC taxed as a partnership, an LLC taxed as a C corporation pays income tax directly; the entity itself is the taxpayer, and the corporate tax rates apply instead of the individual rates. If an LLC has elected C corp. tax treatment, the members pay taxes only on the LLC income they receive in the form of salary and dividends.
How is the income of a LLC taxed?
LLC income to that owner would be taxed at their stardard tiered tax rate. The same is true for LLCs that elect to be taxed as S-corps, which only taxes personal income when it is reported on Form 1120S. If an LLC elects to be taxed as a C-corp, they are subject to corporate tax rates and double taxation.
What kind of tax treatment can a LLC get?
An LLC can elect tax treatment as a disregarded entity, a partnership, a corporation, or an S corporation for federal tax purposes. There is much confusion about what an LLC must do if it converts to a Corporation.
Can a LLC elect to become a s-Corp?
Additionally, all members of the LLC must present a written agreement as to the change in status. A single member LLC cannot elect to become an S-corp, and limitations exist as to the profiles of the newly structured company and its partners. The company must be registered in the United States.
