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Limited liability companies

REG Chapter 22 · Area V · Blueprint V.E

A limited liability company is a creature of state law: it protects its owners from the company's debts. The federal tax law does not have an 'LLC' category at all. Instead, under the check-the-box regulations, an LLC is taxed as a disregarded entity, a partnership or a corporation, depending on how many members it has and what it elects. This chapter covers the default classifications, Forms 8832 and 2553, what happens for tax when an LLC changes its classification or gains or loses a member, self-employment and payroll taxes for members, and how to choose. Lena, Owen and Tomas each run their business through an LLC. Figures are for tax year 2026.

In this chapter

1. An LLC under state law and under the tax law
2. Default classifications
3. Electing a classification
4. Changing classification and changing members
5. Self-employment and payroll taxes for members
6. Choosing and reviewing the classification

This chapter has 6 lessons, 50 practice MCQs with explanations and 20 simulations, plus flashcards and a recall sheet.

What this chapter covers

• Tax classification choices for an LLC
• check-the-box defaults and elections
• members' self-employment tax

Chapter 21: Partnerships · Chapter 23: Tax-exempt organizations