Have a Tax Question? Ask a Tax Expert
Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.
How are you today?
If you are an LLP, you will file taxes as a partnership and use form 1065.
If you are an LLC and are the sole member you can file as a sole proprietor or an S corp
I am good
Well in the previous years we have filed as a sole proprietership and with the business growing every year just wonder if a S Corp would be more beneficial?
Yes, it would be because you will save money on your self employment taxes
Our CPA told me that the IRS does not recognize a LLP so we are trying to understand why we changed to an LLP in 2011 if it is not recognized
It's a disregarded entity
Please bear with me on this. We did jump into this opportunity with very little knowledge and experience. We have looked for assistance in making the right choices but have not recieved any. So in other words, its just a title?
but you can elect to be taxed as an S Corp
Yes, that is correct
It's an organization for legal purposes but not for tax purposes
Ok. That makes more sense. Now I was reading S Corp guidelines on the IRS website and it noted that if you are a partnership, you cannot file as such. What does that mean?
It means that if you are a partnership, you cannot be taxed as an S Corp. But if you are an LLC you can be taxed as an S Corp
So being the LLP that we are, we cannot even begin to file as an S Corp?
No, you are a partnership
SO you file form 1065
Ugh....this is so confusing to me. So in your expert advice, what would be the best way for to file. Because we have forms that need to be signed to change to a S Corp but if we cannot file as such, why did our CPA send them to us? I guess thats where Im confuses
The best way to file is as a partnership using form 1065. Your CPA knows more about your setup and your particular situation, so if they give you particular advice I would take it.
I wish I could trust him. He has done nothing to give us advise. That is why I came on here honestly.
And as a partnership, we must always file as sole proprieter, correct?
So in order to take advantage of the S Corp we would need to change our business to a LLC?
ok. that is making more sense
And as we stand it is myself and my husband as the partnership, so we have to file our entire taxes together. Including his pay from the business. I just want to be able to file and take advantage of the best way to do so.
no Im good