For tax purposes, Is it better to file a LLC as a single owner or have a partnership? For example, add a spouse as Co-Owner of a business or be the single owner. How is liability impacted between single owner LLC and partnership LLC?

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For tax purposes, Is it better to file a LLC as a single owner or have a partnership? For example, add a spouse as Co-Owner of a business or be the single owner. How is liability impacted between single owner LLC and partnership LLC?

Single owner LLC is a ‘disregarded entity’ but how is liability impacted?
Is there any advantage in filing as LLC with 2 members vs single-owner LLC?

Asked on January 30, 2018 under Business Law, Virginia

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

There is no tax distinction between single owner and multiple owner LLCs, assuming you select "disregarded entity" or "pass through" tax treatment when you form the LLC. (You have the right to have your LLC taxed as a corporation, but I'm not sure why any small business person would do that.) In either event, the LLC profits "pass through" and "disregard" the LLC and drop directly to the owners' ("members") income and are taxed with their other income. Each owner would get a share of LLC profits (or losses, tax-loss or deduction purposes) equal to his or her share or percentage of ownership.
 


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