Legal Question in Tax Law in California
Election of corporate tax treatment for LLC
An LLC can be chosen to be treated as a partnership or a corporation. Treated as a partnership, it has the problem of non-deductible fringe benefits. Treated as a corporation, what problems does it have in common with a corporation (i.e. 35% flat tax for professionals)? Under what condition would the choice be made to file for corporate tax treatment? As a professional service company, what is considered the best entity for tax and liability treatment?
1 Answer from Attorneys
Re: Election of corporate tax treatment for LLC
A problem with an LLC or LLP, the latter is used for law professional LLC, is the CA requirement of an annual gross receipts tax which is currently capped at somewhere around $8,000. By electing to be taxed as a corporation then for all practical purposes the entity is taxed as a corporation. The selection as to what kind of entity to use depends on the facts. To attempt to answer a generic question is next to impossible without exploring all the facts that go into the making of a decision.
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