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Author: dka Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121426  
Subject: single member LLC Date: 12/7/2000 1:51 PM
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Hello, Fools! I understand that a single member LLC will automatically be classified as a sole proprietor in terms of a taxable entity by the IRS unless the LLC explicitly elects to be taxed as a corporation. This would mean that all LLC income would pass through to the owner on the 1040 tax form, correct? If this is so, does the LLC need its own tax identification number? Or is the owner's TIN used in all cases?
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Author: criser Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42610 of 121426
Subject: Re: single member LLC Date: 12/7/2000 2:19 PM
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Hello, Fools! I understand that a single member LLC will automatically be classified as a sole proprietor in terms of a taxable entity by the IRS unless the LLC explicitly elects to be taxed as a corporation. This would mean that all LLC income would pass through to the owner on the 1040 tax form, correct? If this is so, does the LLC need its own tax identification number? Or is the owner's TIN used in all cases?

The LLC would need its own TIN if the taxpayer as a sole proprietor would need his or her own TIN (e.g., if there are employees).

The other time a TIN would be needed would be if the LLC was a foreign LLC and had to make an affirmative election to be classified as a disregarded entity (sole proprietor). The form (8832) for making the election requires a TIN to be completed properly. US LLCs receive disregarded entity treatment by default with no need to make an election. Foreign LLCs generally have to make an affirmative election to avoid being taxed as a corporation, which would be the default treatment for a foreign LLC.

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Nothing in this message is to be considered as the rendering of legal advice for specific cases. Readers are responsible for obtaining such advice from their own legal counsel. Messages posted on this discussion board are intended to provide information for educational and informational purposes only.

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Author: dka Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42642 of 121426
Subject: Re: single member LLC Date: 12/8/2000 12:31 PM
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The LLC would need its own TIN if the taxpayer as a sole proprietor would need his or her own TIN (e.g., if there are employees). The other time a TIN would be needed would be if the LLC was a foreign LLC...

What happens if an LLC that does not require a TIN files for one anyway? For example, a professional consultant working alone might have an LLC for liability purposes and may wish to give out the LLC's TIN instead of his own SSN. Because of the pass-through taxation, the TIN would basically be a phantom number with 0 income. Would a tax return for that TIN need to be filed as well? Does the IRS require anything else in this situation?

Thanks for your help.

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Author: criser Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42655 of 121426
Subject: Re: single member LLC Date: 12/8/2000 8:00 PM
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What happens if an LLC that does not require a TIN files for one anyway?

I don't think that'll hurt anything, but I'll leave it up to the former IRS-er's here to say something more definitive.

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Author: HatchetJack One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42672 of 121426
Subject: Re: single member LLC Date: 12/9/2000 9:50 AM
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What happens if an LLC that does not require a TIN files for one anyway? For example, a professional consultant working alone might have an LLC for liability purposes and may wish to give out the LLC's TIN instead of his own SSN. Because of the pass-through taxation, the TIN would basically be a phantom number with 0 income. Would a tax return for that TIN need to be filed as well? Does the IRS require anything else in this situation?

______________

This issue doesn't get a lot of attention but there is a "right" and "wrong" way here as you might expect. I believe the matching program (between third party reporting and the individual 1040) started in 1978, at least on a test basis in one or two service centers. For most of the next 20 years, sole proprietorships were required to obtain EIN's. So it followed that the EIN would be given to clients for example to do the proper Form 1099 reporting for business deductions to unincoporated vendors.





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Author: HatchetJack One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42673 of 121426
Subject: Re: single member LLC Date: 12/9/2000 9:56 AM
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My previous reply was submitted accidentally. What follows is the part left off:

About six years ago the IRS issued a reporting requirement for sole proprietorships it issue the owner's social security number for such third party reporting. This now applies even to the interest bearing cash accounts held in the name of the proprietorship. This facilitated the matching program used by the IRS.

Now comes the single member LLC essentially taxed as a sole proprietorship. Basically, the only reason to obtain an EIN is for payroll reporting and retirement plans. But if you obtain an EIN before actually needing to nothing is required by the filer. And the IRS has much more sophistication in the computer records (and the SS-4 application form information) for such entities. So we avoid "why haven't you filed XYZ form?" questions.

HJ

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