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As a small business owner as classified as a LLP in the state

of ND, how does a...
As a small business owner as classified as a LLP in the state of ND, how does a person file on their federal taxes. As a sole proprieter or S Corp? Which is more beneficial?
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Answered in 2 minutes by:
9/11/2013
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Verified

Megan C :

Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.

Megan C :

How are you today?

Megan C :

If you are an LLP, you will file taxes as a partnership and use form 1065.

Megan C :

If you are an LLC and are the sole member you can file as a sole proprietor or an S corp

Customer:

I am good

Megan C :

That's good

Customer:

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?

Megan C :

Yes, it would be because you will save money on your self employment taxes

Customer:

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

Megan C :

It's a disregarded entity

Customer:

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?

Megan C :

but you can elect to be taxed as an S Corp

Megan C :

Yes, that is correct

Megan C :

It's an organization for legal purposes but not for tax purposes

Customer:

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?

Megan C :

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

Customer:

So being the LLP that we are, we cannot even begin to file as an S Corp?

Megan C :

No, you are a partnership

Megan C :

SO you file form 1065

Customer:

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

Customer:

confused

Megan C :

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.

Customer:

I wish I could trust him. He has done nothing to give us advise. That is why I came on here honestly.

Megan C : Ok. If you are an LLP you file as a partnership. If you are an llc you can file the other way
Customer:

And as a partnership, we must always file as sole proprieter, correct?

Customer:

So in order to take advantage of the S Corp we would need to change our business to a LLC?

Megan C : Yes to change to s corp you would need to be be an llc or corporation.
Customer:

ok. that is making more sense

Megan C : LLP should file as a partnership
Customer:

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.

Megan C : yes there's only one way for an LLP.
Customer:

ok. yuck

Megan C : I'm sorry. Is there anything else I can assist you with today?
Customer:

but thanks

Megan C : if not please rate as excellent so that I may receive credit for assisting today
Customer:

no Im good

Megan C : Ok please rate as excellent.
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Megan C
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
16,581 Satisfied Customers
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

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