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1. When dealing with new clients who operate as a Limited Liability Company (LLC), it’s crucial to understand the specific tax structure they have elected. Although LLCs are formed at the state level, the way they are taxed is determined by how they elect to be treated at the federal level. Here’s a comprehensive guide on why and how to approach this:

   Understanding LLC Tax Options

   1. Default Tax Classifications:
   2. Single-Member LLCs: By default, a single-member LLC is taxed as a sole proprietorship. This means that the business income is reported on the owner’s personal tax return using Schedule C of IRS Form 1040.

   3. Multi-Member LLCs: By default, a multi-member LLC is treated as a partnership. This requires the filing of an IRS Form 1065, and the income is passed through to the members to report on their personal tax returns via a Schedule K-1.

   4. Elected Tax Classifications:

   5. Corporation: An LLC can elect to be taxed as a corporation. This can further be as a:
      • C Corporation: Requires filing IRS Form 8832. The LLC will then file a separate corporate tax return using IRS Form 1120.
      • S Corporation: An LLC can choose S Corp election by filing IRS Form 2553. This allows income, typically only that which is distributed to the members as dividends, to be subject to corporate taxation, while other income is passed through.

   Why It Matters to Ask

   • Tax Obligations and Compliance: Understanding the tax treatment helps ensure the client meets all necessary compliance requirements. Different tax treatments require different forms and deadlines.
   • Tax Planning and Strategy: Knowing how an LLC is taxed enables you to provide strategic advice for tax savings and financial planning.
   • Service Structure and Pricing: Different tax structures might require differing levels of effort and knowledge, impacting how you structure your services and pricing.

   How to Approach This with Clients

   1. Initial Inquiry:
   2. When onboarding a new client who identifies as an LLC, start by asking, “Can you confirm how your LLC has elected to be taxed for federal purposes? Is it as a sole proprietorship, partnership, or corporation (C Corp or S Corp)?”

   3. Clarify if they have filed any specific forms to elect a different tax classification, like Form 8832 or 2553.

   4. **Tailoring

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