Is a LLC/LLP a corporation or a partnership for tax purposes?
Posted on December 18, 2008 by admin
jimi p asked:
Myself & my fiance’ are starting a cleaning service. We intend to hire employees. In preparing for this, we decided a Limited Liability Partnership would be the best option.
Myself & my fiance’ are starting a cleaning service. We intend to hire employees. In preparing for this, we decided a Limited Liability Partnership would be the best option.
Would this LLC/LLP fall under the entity type “partnership”, or “corporation”?
Any feedback regarding this entity type selection would also be very welcome.
you will probably qualify as a partnership, not a Corp (Ther are certain guidelines to both). You should talk to the small business association to get that information tho. You are right though, it is mostly about taxes. If you are a corporation, you are what they call, double taxed, but you are only liable as far as the business itself. As a partnership, you are liable for everything you own. Meaning that if someone sues you, they can take everything as a partnership, but the upside is that taxes are lower.
Try this web site it should answer your question.
well, my business is an LLC, my accountant recommended that so that i separate myself from the business, so that if someone sued they can only sue the companies assets, not my personal ones (house, car, etc). sure seems like i pay alot out to the government though…….
GET A GOOD ACCOUNTANT!!!!!!!!
As an LLC OR an LLP your “default” classification with the IRS will be a Subchapter K or 1065 filing entity. However, if you want to file an 1120S you can file an 8832 and elect to be taxed under Subchapter S. (You can also elect to be taxed as a C-corp but I have no idea why you would want to do that unless you plan to go public someday
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Unless you are in Florida I cannot possibly comment on your entity selection because your liability protection (or lack of it) is dictated by your state statutes. If you did not have professional advice while making your entity selection you should AT THE VERY LEAST get into a Small Business Administration office so that someone locally can give you the differences in liability protection in your state for your entity choices.
Good luck with the new business venture!
Generally you would be a partnership but under the “check the box “provisions of the tax code you could elect to be taxed as a corporation. You should discuss with a CPA to decide what would be best for you.