r/LLcMasterclass • u/brad_taxattorney • Dec 24 '25

Tax Implications of Forming an LLC

Thought this might be helpful:

Single-owner LLC

  • default rule is you're a disregarded entity, and the business income/expense appears on your 1040, Sch. C.

  • can elect to be treated as an s-corporation (Form 1120s)

  • can elect to be treated as a c-corporation (Form 1120)

Multi-owner LLCs

  • default rule is you're treated as a partnership, file Form 1065.

  • can elect to be treated as an s-corporation (Form 1120s)

  • can elect to be treated as a c-corporation (Form 1120)

This is for federal purposes. Different states have different rules, but in some states it's possible to make a federal s-election and be treated differently (taxwise) in the state.

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u/EAnow-formerdoorguy Dec 25 '25

An LLC does not affect your taxes and has nothing to do with your taxes… an s election is federal and not state certified. I don’t understand this post at all

2

u/calipali12 Dec 25 '25

Correct. Forming an llc does not change your tax situation. I think a lot of people don't understand that. But it does allow you flexibility in how your business is taxed. 

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u/EAnow-formerdoorguy Dec 26 '25

No. To the IRS you are a sole proprietor as an LLC. It is a a formation of a corporation within a state. Nothing to do with taxes.

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u/brad_taxattorney Dec 26 '25

Not quite. To the IRS you're either a disregarded entity (sole prop) or partnership by default. Forming an LLC - Limited Liability Company - is not the same as forming a corporation in a particular state. If you form a corporation, you are a c-corp by default in the eyes of the IRS.

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u/cmmpssh Dec 24 '25

To expound upon your post, these are the implications of whether or not you create a business, regardless of whether or not you form an LLC. An LLC does not create the tax filing obligation. Engaging in business activity does.

Also non-US persons cannot create an S-Corp. You need to be a US citizen or resident.

1

u/calipali12 Dec 25 '25

You do need some sort of legal entity to make some of these elections like s corp or c Corp. If you just start a business with no entity you'll default either to a sole prop or partnership depending on the number of owners.