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Sole proprietor to 1 member LLC, is 8832 required?

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    Sole proprietor to 1 member LLC, is 8832 required?

    Sole proprietor becomes a single member LLC. Is form 8832 electing to be "A domestic eligible entity with a single owner electing to be disregarded as a separate entity" need to be filed?

    Taken from the IRS website link below, 4th paragraph down: "An SMLLC that does not elect to be a corporation will be classified by the existing federal guidance as a “disregarded entity” which is taxed as a sole proprietor for income tax purposes".


    #2
    Originally posted by AZ-Tax View Post
    Sole proprietor becomes a single member LLC. Is form 8832 electing to be "A domestic eligible entity with a single owner electing to be disregarded as a separate entity" need to be filed?

    Taken from the IRS website link below, 4th paragraph down: "An SMLLC that does not elect to be a corporation will be classified by the existing federal guidance as a “disregarded entity” which is taxed as a sole proprietor for income tax purposes".

    http://www.irs.gov/businesses/small/...158625,00.html
    No, the 8832 is to elect a corporation only (since one person can't be a partnership). If not electing then the disregarded LLC is taxed as a sole proprietor. No, action is needed because the LLC is disregarded.
    JG

    Comment


      #3
      Yes, but...

      I agree that Form 8832 is not used in this scenario.

      However...

      The LLC is a new entity, established under state law. It is in fact a disregarded entity, so for tax purposes, your client will continue to have a sole prop.

      But because he has formed a new entity, he may need a new EIN.

      BMK
      Burton M. Koss
      koss@usakoss.net

      ____________________________________
      The map is not the territory...
      and the instruction book is not the process.

      Comment


        #4
        Just curious, will your client be titling the assets in the name of the LLC?
        Dave, EA

        Comment


          #5
          Originally posted by Koss View Post
          I agree that Form 8832 is not used in this scenario.

          However...

          The LLC is a new entity, established under state law. It is in fact a disregarded entity, so for tax purposes, your client will continue to have a sole prop.

          But because he has formed a new entity, he may need a new EIN.

          BMK
          That is an important point - I have a client that is Sole prop with a new LLC and they need to start using that EIN (LLC) for their payroll starting 01/01 when the LLC begins. . And the name of the LLC goes on Schedule C. That's what I found out in research at any rate
          JG

          Comment


            #6
            Assets to remain titled in single members name.

            Originally posted by dsi View Post
            Just curious, will your client be titling the assets in the name of the LLC?
            As I understand, the assets will remain in single members name. Will that be an issue?

            Comment


              #7
              Originally posted by AZ-Tax View Post
              As I understand, the assets will remain in single members name. Will that be an issue?
              Not as far as income taxes are concerned; I'm not sure about payroll taxes. The real question is how that will affect the liability protection (which is the basic reason for an SMLLC).

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