IRS wants me initially be classified as a partnership instead of LLC, is that okay?

UPDATED: Oct 1, 2022

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IRS wants me initially be classified as a partnership instead of LLC, is that okay?

I’m trying to start up a new business with my brother and father and since it would be a multi-member LLC, the IRS said ‘we must initially classify you as a partnership’ when applying for my EIN. Is that a problem? From what I understand, it just means each of us will include the business on our individual federal tax return next year, and that’s basically the only difference. Is that correct? I just want to make sure because I filed the certificate of formation for the LLC with my secretary of state so I don’t want to mess this up so early on.

Asked on May 21, 2018 under Business Law, Texas


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

How you are classified for tax purposes does not alter or affect the existence of an LLC or the protections (e.g. limited liability) you get under your state's laws for having an LLC; all the IRS's classification affects is federal tax treatment.
All multi-member LLCs, by the way, are classified (for tax purposes) as either a partnership ("pass through" or "disregarded" treatment: the profits and losses go directly to and are reported  and taxed with the members' other income) or as a "corporation" (corporate tax treatment; the LLC itsself is taxed on its income). "Partership" and "corporation" are the two modes of tax treatment.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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