Filing Requirements: Same
rules as a general partnership—must file a return, regardless of the
amount of income or loss.
Filing Deadline: By the 15th day of
the 4th month following the close of the tax year.
Extension Deadline and Form Number: Form
8736 extends deadline 3 months. Form 8800 extends the deadline an
additional 3 months.
Penalties: Failure to file return:
$50 per month per partner up to 5 months. Penalty is assessed against
partnership.
Profits/Tax Rates: Profits are
passed through and taxed on the individual Limited Liability Company (LLC)
member’s tax return.
Basics Of Limited Liability Company (LLC)
Limited Liability Company(s) (LLCs) are created and regulated under laws
of each individual state. A Limited Liability Company (LLC) is allowed to possess the limited
liability characteristics of a corporation, but is treated as a
partnership for Federal tax purposes. Federal taxation of Limited Liability Company(s)
(LLCs) is governed
by Subchapter K of the Internal Revenue Code. Unlike general partners
whose personal assets are at risk for claims against the
partnership, Limited Liability Company (LLC) members are only at risk for their investment in the
Limited Liability Company (LLC). A Limited Liability Company (LLC) is nevertheless allowed
pass-through taxation, avoiding double-tax on income that is present in
corporations. Combining the benefits of partnership and corporate
characteristics, without many of the drawbacks, has created a surge in
popularity of Limited Liability Company(s) (LLCs).
As a partnership, the Limited Liability Company (LLC):
• Can make special allocations of income,
gain, loss, deductions and credits.
• Can make a Section 754 election to
adjust basis of Limited Liability Company (LLC)
assets whenever a member sells
his/her interest.
• Can use debt to increase a member’s
basis.
