Can a single-member LLC (by default, a disregarded entity) elect to be taxed as a corporation via IRS Form 8832?
Yes, a single-member LLC may elect to be taxed as a corporaiton by filing Form 8832.Quoting the last sentence of the first paragraph on the IRS page at Single Member Limited Liability Companies:And an LLC with only one member is treated as an entity disregarded as separate from its owner for income tax purposes (but as a separate entity for purposes of employment tax and certain excise taxes), unless it files Form 8832 and affirmatively elects to be treated as a corporation.
How do I correctly fill out a W9 tax form as a single member LLC?
If your SMLLC is a sole proprietorship/disregarded entity, then you put your name in the name box and not the name of the LLC. You check the box for individual/sole proprietor not LLC.If the SMLLC is an S or C corp then check the box for LLC and write in the appropriate classification. In that case you would put the name of the LLC in the name box.
What tax form do I need to fill out to convert from single member LLC to multi-member LLC?
When you add a member to your previously single member LLC (which you can do structurally by amending your operating agreement and filing an amended report, if required, with your secretary of state), you cease to be a 'disregarded entity' under the applicable Treasury Regulations.Going forward, you will either be a (a) partnership, by default, and will have to file a partnership income tax return on Form 1065, or (b) a corporation, if you so elect, and will have to file a Form 1120 if you are a C corporation or Form 1120S if you elect to be taxed as an S corporation.There can be other tax issues as well, and these need to be addressed with a business CPA.
Can a single-member LLC elect to be treated as a corporation by filing Form 8832 and pay the corporate tax rate of 21%?
Of course it can.That’s what Form 8832, Entity Classification Election is for.And now that the corporate tax rate has been reduced from 37% to 21%, more Single Member LLCs are choosing to do that.They set their salary equal to the anticipated profits of the business, and in effect, reduce the profit to zero, and pay no corporate taxes.Of course, the better choice might be for the LLC to file Form 2553 and elect to be treated for tax purposes as an S Corp, then set a salary of about one-third of the anticipated profits, and the remaining two-thirds drops through as taxable income, but not subject to the Self-Employment tax of 15.3%.And if the LLC is operating a rental real estate business, the SMLLC can just file no election, be classified as a Disregarded Entity for tax purposes, and all of the income will be considered passive income, and not subject to the 15.3% SE tax.The LLC is the best of all of the Business Entities for liability protection, and for tax planning, depending on your situation.I hope this helps.Michael Lantrip, Attorney | Accountant | InvestorMichael Lantrip
When dissolving an LLC do you need to fill out IRS Form 966?
The answer will be yes or no depending on how your entity is recognized for tax purposes. An LLC is not a recognized entity by the IRS. By default, a single-member LLC is organized for tax purposes as a sole proprietorship and a partnership for tax purposes if there is more than one member. However, you can make an election to be taxed as a C Corporation (i.e., an LLC for legal purposes that is taxed as a C Corporation for tax purposes).You must complete and file form 966 to dissolve your LLC if you have elected to be a C Corporation or a Cooperative (Coop) for tax purposes. S Corporations and tax-exempt non-profits are exempt from filing this form (see here).If you are organized for tax purposes as an S Corporation you would file your taxes via form 1120S for the last time and check the box indicating that your return is a “Final Return.” Same is true for a Partnership, but with form 1065.On a state and local level, best practice is to check with your state and local agencies for requirements.For digestible information and tools for understanding how the tax landscape affects your business, visit Financial Telepathy
How do I fill up EIN form as a non us citizen for single member LLC? That is confusing to me?
I have helped dozens of international (non-U.S.) citizens obtain EINs for their entities and have blogged extensively about my experiences.It is understandable that you are confused. Although the instructions for Form SS-4 are relatively complete, some requirements may not be readily understood by non-Americans. Even more important, the IRS has certain policies, practices and expectations concerning foreigners that they don’t even publicize!I can’t take the time to tell you what to put in each of the dozens of lines on the Form. Instead, you should read Foreign Company Alert: Obtaining an EIN may be your Biggest Challenge in the U.S. It is long and detailed and reflects much of what I have learned about the process.I wish you the best!
How do you notify the IRS of a change of ownership of a single-member LLC?
Sort of depends on how ownership was transferred. If the entity was sold, the seller would mark the Schedule C as final, and report the proceeds (less any tax basis) as capital gain. The new owner would need to apply for a new federal ID number. Transfers of ownership of single member LLCs to unrelated taxpayers is rather rare, more often than not, the assets are transferred, not ownership.
How is a single-member LLC owned by a nonresident alien taxed? Should I fill out a W-8 or am I deemed not to have U.S. activities?
Based on the facts as you have presented them:You are selling a product, as I see it, and not a service - although there's something of a gray area here, this is more like an intangible asset than it is providing a personal service for compensation. That product is being offered to US-based customers who are using it in the US - your focus is building up your market in the US, and you are doing that under the auspices of an LLC which is US-based. Looking at all of the facts and circumstances surrounding the conduct of your business, as you have presented them and as the IRS will look at them if asked, I conclude that you are conducting a business in the US and your income from US sources is effectively connected with the conduct of that business in the US, which means that you are subject to US taxes on that income.With that conclusion, Form W-8ECI is the proper form to provide to your US sources if you wish to prevent withholding on the income from your business.I want to add one point, since this seems to be coming up frequently - while an LLC is a disregarded entity for tax purposes, it is still a legal entity in the US - and the fact that you, as a nonresident alien, choose to operate a business under the auspices of a US-based LLC is a piece of evidence that can, under the appropriate set of facts and circumstances, be used by the IRS to support an argument that you are conducting business in the US and that your income from that business that comes from US sources should be taxable in the U.S. You should not assume that as a nonresident alien you have carte blanche to create a US LLC, operate a business under its auspices, and then at tax time argue that the income should not be taxable in the US because the LLC is a disregarded entity. The IRS will look at all of the facts and circumstances surrounding your business, including your choice of a US-based entity as the face of your business, and while that decision alone won't be dispositive, it will certainly be considered.
I have a US LLC since Nov 2018 (single member foreign-owned) that is not involved in any business activities yet. Should I fill the IRS Form 5472 Tax return? Or until I start doing business under my LLC name?
Yes, you must file it for this case too. Fines are heavy. Here the relevant extracts from its instruction supporting my answer:Foreign-owned U.S. DEs(disregarded entities). While a foreign-owned U.S. DE has no income tax return filing requirement, as a result of final regulations under section 6038A, it will now be required to file a pro forma Form 1120 with Form 5472 attached by the due date (including extensions) of the return. The only information required to be completed on Form 1120 is the name and address of the foreign-owned U.S. DE and items B and E on the first page. The foreign-owned U.S. DE has the same tax year used by its owner for U.S. tax filing requirements or, if none, the calendar year. “Foreign-owned U.S. DE” should be written across the top of Form 1120. File these forms by: • Fax (300 DPI or higher) to 855-887-7737, or • Mail to: Internal Revenue Service 1973 Rulon White Blvd M/S 6112 Attn: PIN Unit Ogden, Utah 84403Penalties for failure to file Form 5472. A penalty of $25,000 will be assessed on any reporting corporation that fails to file Form 5472 when due and in the manner prescribed. The penalty also applies for failure to maintain records as required by Regulations section 1.6038A-3.Note. Filing a substantially incomplete Form 5472 constitutes a failure to file Form 5472.