Advanced Underwriting Consultants

Question of the Day – November 10

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax questions posed by producers.  Here’s the question of the day.

Question: My client wants to implement a bonus plan for the client’s LLC.  Is the LLC taxed as a corporation, a partnership or a proprietorship?

Answer: It depends.

LLCs are authorized by state statutes.  In general, the owners of an LLC are allowed to elect how the organization will be allowed to be taxed for federal income tax purposes.  In fact, the instructions for the IRS form to apply for a business tax ID make it clear how the LLC can choose different tax treatments for the business.

An LLC can generally elect to be taxed as an S corporation or a C corporation.  If it has two owners, it can elect to be taxed as a partnership.  If there is just one LLC member, it can elect to be taxed as a proprietorship.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.