Assignment #3Taxation 306Choosing a tax year for a Limited Liability Company (LLC) is important for a small business, asit partially defines the business' year. An LLC is normally treated and taxed as a partnership bythe IRS, which means it follows partnership tax rules. As a result, the tax year of the LLC issupposed to conform as closely as possible to the tax year of its members. The LLC can choose atax year that is not defined by this criterion, as long as it can establish a business purpose for thechange.Step 1Ascertain if the LLC has a legitimate business reason to have the tax year end on a certain day. Ifsuch a business purpose exists, the IRS will generally permit the LLC's tax year to conform tothat purpose. An example of a business reason would be that an LLC's industry is seasonal, and itmakes more sense to have a tax year that corresponds to the end of the busy season. If there is alegitimate business reasons for a specific tax year, file Form 1128 with the IRS for approval.
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Corporation,Taxation in the United States,Limited Liability Company