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PDtax
PDtax, CPA, MBA
Category: Finance
Satisfied Customers: 4666
Experience:  Tax professional and business consultant for 35 years.
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If an LLC Elects to be taxed as a C-Corp. Are the company

Customer Question

If an LLC Elects to be taxed as a C-Corp. Are the company books kept as a C-Corp or as an LLC
Submitted: 1 year ago.
Category: Finance
Expert:  PDtax replied 1 year ago.

Hi from just answer. I'm PDtax.

Easiest to keep the books as a corporation, and a C corp at that. Saves an annual translation of book to tax. Maintains corporate form for business affairs as well, since owners would treat distributions from C corp differently than unincorporated form.

It's just much easier to operate as a C corp for both.

Thanks for asking at just answer. Positive feedback is appreciated. I'm PDtax.

Customer: replied 1 year ago.
would the EOY profits/losses of the company be allocated to the members at the end of the year or are they legally considered retained earnings of a C-Corp. I understand the C-Corp election is just a taxation election and it doesn't give the legal benefits of a C-Corp as far as allotment of earnings..
Expert:  PDtax replied 1 year ago.

They are legally considered to be retained earnings. In fact, declarations of payments to the members must be made legally, and should be consistent with their tax treatment. Minutes of the annual meeting indicate management intent.

Distributions to LLC members taxed as a C could be receiving dividends and C corp could have taxable income. This is an IRS auditor's dream, as this error would extend for years.