Partnerships

• Once the LLC is legally created, the IRS automatically treats the business as a partnership for income tax purposes if there are at least two owners. A partnership is not a separate taxpayer and therefore is not responsible for remitting income tax payments. It is, however, required to prepare an informational tax return on IRS Form 1065 along with a Schedule K-1 for each owner. The 1065 provides the IRS with an aggregate view of all LLC business earnings and deductions, whereas, the K-1s reports each owners share of those items. When owners receive their K-1, they must report all income tax items on their personal income tax return. Each owner is solely responsible for reporting his share of taxable income and making the appropriate payment by the deadlines applicable to his tax return.
  
  

Sole Proprietorship

• When the LLC has only one owner, the IRS treats the business as a sole proprietorship. In a sole proprietorship, the business is not treated as a separate taxpayer; the owner is responsible for his personal income taxes as well as the LLC's. At the end of the tax year, the owner reports all income and deductions that relate to the business on a Schedule C attachment to his personal tax return. The taxable income from business operations are then added to the owner's personal income tax return. Owners are solely responsible for reporting the income and paying taxes by the deadline, which is usually April 15.
  
  

C Corporation

• If you are unsatisfied with the automatic designations of the IRS, you can make an election on IRS Form 8832 to treat the LLC as a C corporation. However, once you make an election, the LLC must adhere to all corporate tax requirements for five years before a new election can be made back to a partnership or sole proprietorship. A corporation is a taxpayer separate and distinct from its owners. This means that the business itself is responsible for filing an annual tax return on Form 1120 and paying all taxes. Even though owners are not directly responsible, their investments in the LLC can be taken by the IRS if the business fails to comply with the tax laws. Annual corporate tax returns are due by the 15th of the third month following the end of the tax year. Because corporations need not always use a calendar year as its tax year, due dates can vary.
  
  

S Corporation

• The IRS does allow you to elect treatment as an S corporation if the owners file Form 2553. However, this structure has restrictive requirements and is rarely used by the average taxpayer. In the event you do make this election, the same income tax deadlines that apply to C corporations also apply.