tax hw3 - Assignment#3 Taxation 306 Choosing a tax year for a Limited Liability Company(LLC is important for a small business as it partially defines

tax hw3 - Assignment#3 Taxation 306 Choosing a tax year for...

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Assignment #3 Taxation 306 Choosing a tax year for a Limited Liability Company (LLC) is important for a small business, as it partially defines the business' year. An LLC is normally treated and taxed as a partnership by the IRS, which means it follows partnership tax rules. As a result, the tax year of the LLC is supposed to conform as closely as possible to the tax year of its members. The LLC can choose a tax year that is not defined by this criterion, as long as it can establish a business purpose for the change. Step 1 Ascertain if the LLC has a legitimate business reason to have the tax year end on a certain day. If such a business purpose exists, the IRS will generally permit the LLC's tax year to conform to that purpose. An example of a business reason would be that an LLC's industry is seasonal, and it makes more sense to have a tax year that corresponds to the end of the busy season. If there is a legitimate business reasons for a specific tax year, file Form 1128 with the IRS for approval.
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  • Spring '11
  • Corporation, Taxation in the United States, Limited Liability Company

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