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Tax Filings for a Single-Member LLC

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Q. In your Special Report on LLCs (see 9/18/06 issue), you say that SMLLCs are exempt from federal tax filing. I believe that this is not true, although they can choose which type of entity they want to be taxed. Which is it? Anonymous

A. A single-member limited liability company (SMLLC) can choose to be treated as either a corporation (which is generally not advisable) or a “disregarded entity.” To be treated as a corporation, the SMLLC must file Form 8832 and elect to be classified as a corporation. Otherwise, the SMLLC is treated as a disregarded entity, which, generally, is taxed as a sole proprietorship. As we stated in the Special Report you cite, expenses and income in the sole-proprietorship scenario are reported on the taxpayer’s Schedule C. Note: Space and reader considerations allowed our Special Report to cover LLCs only in general terms. If you’re considering a switch to the LLC format, you should consult with a tax pro for all the details.

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