Limited Liability Companies
At Mraz Tax Solutions, we recognise that business owners often form a limited liability company (LLC) to benefit from liability protection, operational flexibility and favourable tax treatment. This page summarises the key aspects of LLC formation and taxation, the decisions you'll face, and how our firm can assist you with structuring your entity and preparing your tax returns.
*We provide a free initial consultation with a licensed tax advisor to determine your tax needs.
How Mraz Tax Solutions Can Help Your LLC
Given the complexity of LLC tax matters and your goal of optimising entity structure, we offer specialised services to business clients and complex-return individuals.
Preparation of business tax returns
We prepare partnership returns (Form 1065), S-corp returns (Form 1120-S) or provide guidance for S-election, and individual returns incorporating Schedule C, E or F.
Multistate returns
For Limited Liability Companies (LLCs) with nexus in multiple states, we assist with apportionment, sourcing income, and state tax filings.
Entity election planning
Analyse whether your LLC (or proposed LLC) should be taxed as a disregarded entity, partnership, S corporation, or C corporation.
Ongoing compliance consulting
We advise on state tax obligations, quarterly estimated tax requirements, payroll issues, and maintaining the integrity of your LLC.
Tax-efficient owner compensation strategies
For an LLC taxed as an S corporation, we help in determining reasonable salary, distributions, and documentation to withstand IRS scrutiny.
Book a consultation
If you are interested in learning more about our services, schedule an appointment with one of our tax experts. Book a one-on-one phone call and learn more about how we can help you with your tax needs.
What is a Limited Liability Company (LLC)?
A limited liability company (LLC) is a business entity created under state statute (for example, in California) whose owners are often called “members”. While each state has its own formation and filing requirements, from a federal tax perspective the entity is governed by the classification rules of the Internal Revenue Service (“IRS”).
Some key features:
- The LLC structure typically provides owners with limited liability for the debts and obligations of the business. That means the members' personal assets are generally insulated from business creditors, provided business and personal affairs are kept separate.
- The entity is a state-law creation, not a federal tax creature; how it is taxed depends upon elections and number of members.
- Because of its flexibility, the LLC may be managed by its members (member-managed) or by designated managers (manager-managed).
Default Tax Classification of an LLC
Under federal tax rules, an LLC's classification depends on the number of members and any timely elections made. Here is a summary:
- Single-Member LLC (SMLLC): If an LLC has only one member and does not elect to be treated as a corporation, it is treated as a “disregarded entity” for federal income tax purposes. In that case, the income and losses of the LLC flow through to the owner's individual return (e.g., Form 1040).
- Multi-Member LLC: If an LLC has two or more members, and no election is made, the default federal classification is a partnership. The LLC must file Form 1065 and issue Schedule K-1s to the members.
- Election to be taxed as a Corporation: An LLC (single or multi member) may elect to be treated as a corporation for federal tax purposes by filing Form 8832 (“Entity Classification Election”). If it then qualifies and chooses, it may further make an S corporation election (Form 2553) if eligible.
Contact us today to discuss your LLC strategy and begin taking advantage of professional tax guidance you can trust.
Frequently Asked Questions
If you are considering forming an LLC, converting an existing business to an LLC, or optimising your LLC’s tax status, we invite you to schedule an initial consultation with us. We will review your business goals, income projections, ownership structure, and tax-planning opportunities, and provide you with a clear recommendation tailored to your situation.
My business is a single-owner LLC, can I still be taxed as an S-corp?
Yes. A single-member LLC can elect to be treated as a corporation by filing Form 8832, and then elect S-corporation status with Form 2553 (if eligible). It continues to be an LLC under state law, but is taxed as a corporation for federal tax purposes.
If I have two or more members in my LLC, must I file a partnership return?
By default yes, the IRS treats a multi-member LLC as a partnership unless a corporate election is made. The LLC must file Form 1065 and each member receives a Schedule K-1.
Does forming an LLC automatically save me taxes?
Not necessarily. Forming an LLC provides legal liability protection and tax classification options, but the tax savings depend on your income levels, how you're paid, whether you elect S-corp status, state tax issues, and other factors. A thorough analysis is required.
What happens if I don't keep my LLC's affairs separate from my personal matters?
Failure to respect the formalities of the LLC (for instance, commingling personal and business funds, not maintaining records) can increase the risk of “piercing the corporate veil,” where personal liability might be exposed. Good record-keeping and separate finances strengthen your legal position.
Why file your taxes with Mraz Tax Solutions?
We specialize in individual and small business tax returns. Whether you're an employee filing a W-2, a contractor taking part in the sharing economy filing a 1099 or a small business owner, we are here to help. We understand the importance of minimizing your tax and getting you the maximum refund you are legally entitled to. In order to do this and to prepare a complete and accurate return we take the time to get to know you and your goals.