This could be the most important article you read on the web regarding the choice of your tax status as an LLC. So many mistakes are made in this area and as a result, the formation of the LLC is hindered from the start. Back when LLC’s were first written into law, it was the intention of our lawmakers to create an entity that provided limited liability protection, and the freedom to choose a tax status that would suit the LLC’s business model. However, shortly into the use of the new legal entity did many LLC providers (lawyers, law firms, etc) realize that many business owners needed to talk to a qualified tax professional to choose the right tax status. Of course, Lawyers didn’t want the hassle of providing this as part of the LLC service. As a result, many business owners would visit their tax professionals the following year to do their taxes and were penalized for not having made the appropriate elections to avoid the large tax pitfalls.
The tax designation of your LLC is an important decision and should be made with careful consideration. The determining factor of which tax status you should ultimately be depends on your goals and preferences as an owner.