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Frequently Asked Tax Questions

Small Business/Self-Employed/Other Business - Entities: Sole Proprietor, Partnership, Limited Liability Company/Partnership (LLC/LLP), Corporation, Subchapter S Corporation


Rev. date: 1/2009

Can a husband and wife run a business as a sole proprietor or do they need to be a partnership?


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previous topic occurrence Form 1040 (Schedule SE) next topic occurrence
previous topic occurrence Husband-Wife Business next topic occurrence
previous topic occurrence New trade or business next topic occurrence
previous topic occurrence Partnership next topic occurrence
previous topic occurrence Profit or Loss from Business (Sole Proprietorship) next topic occurrence
previous topic occurrence Publication 541 next topic occurrence
previous topic occurrence Self-Employment next topic occurrence

For a business to be classified as a sole proprietorship:
If a married couple who file a joint tax return elects to conduct their business activities as a qualified joint venture:

Rev. date: 1/2009

I recently formed a limited liability company (LLC). The LLC has no employees. Do I need a separate Federal Tax ID number for the LLC?


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Application for Employer Identification Number
previous topic occurrence Federal Employer Identification Number next topic occurrence
previous topic occurrence Identification Number next topic occurrence
previous topic occurrence Individual taxpayer identification number next topic occurrence
previous topic occurrence Limited Liability Company next topic occurrence
previous topic occurrence New trade or business next topic occurrence
previous topic occurrence P3402 next topic occurrence

If you are the sole owner of the LLC and the LLC has no employees, you will not need a separate Federal Tax ID number.
If you are the sole owner of the LLC and the LLC has employees, you will need to get a separate Federal Tax ID number, if you choose to have the LLC report and pay employment taxes.
 If you are not the sole owner of the LLC, you will need a separate Federal Tax ID number for the LLC. See Notice 99-6, 1999-1 CB 321.

Rev. date: 1/2009

For IRS purposes, how do I classify a limited liability company? Is it a sole proprietorship, partnership or a corporation?


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previous topic occurrence Limited Liability Company next topic occurrence
previous topic occurrence P3402 next topic occurrence
previous topic occurrence Partnership next topic occurrence
Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent
previous topic occurrence Self-Employment next topic occurrence

A limited liability company (LLC) is an entity:
If the LLC has:
If the LLC does not make a classification election, a default classification of disregarded entity (single-member LLC) or partnership (multi-member LLC) will apply. The election referred to is made using the Form 8832 (PDF), Entity Classification Election. If a taxpayer does not file Form 8832 (PDF), a default classification will apply.

Rev. date: 1/2009

Are partners considered employees of a partnership or are they self-employed?


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previous topic occurrence Compensation, Wage, Salary next topic occurrence
previous topic occurrence Employment Tax next topic occurrence
previous topic occurrence Partnership next topic occurrence
previous topic occurrence Publication 541 next topic occurrence
previous topic occurrence Self-Employment next topic occurrence
previous topic occurrence U.S. Return of Partnership Income next topic occurrence


Rev. date: 1/2009

Must a partnership or corporation file a tax form even though it had no income for the year?


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previous topic occurrence Corporation next topic occurrence
previous topic occurrence Partnership next topic occurrence
U.S. Corporation Income Tax Return
previous topic occurrence U.S. Return of Partnership Income next topic occurrence

A domestic partnership must file an income tax form unless it neither receives gross income nor pays or incurs any amount treated as a deduction or credit for federal tax purposes.
A domestic corporation must file an income tax form whether it has taxable income or not.

Rev. date: 1/2009

Can you give me plain English definitions for the following: (1) a closely held corporation, (2) a personal holding corporation, and (3) a personal service corporation?


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previous topic occurrence Corporation next topic occurrence
previous topic occurrence Personal Service Corporation (PSC) next topic occurrence
Section 280H Limitations for a Personal Service Corporation (PSC)

Generally, a closely held corporation is a corporation that:
The definitions for the terms "directly or indirectly" and "individual" are in Publication 542, Corporations.
A personal holding company is:
The Income Test states that at least 60% of the corporation's adjusted ordinary gross income for the tax year is from dividends, interest, rent, and royalties.
The Stock Ownership Test states that at any time during the last half of the tax year, more than 50% in value of the corporation's outstanding stock is owned, directly or indirectly, by 5 or fewer individuals.
Refer to the Form 1120, Schedule PH Instructions for more information and a list of exceptions.
A personal service corporation is a corporation where:
previous pagePrevious Page: Sale or Trade of Business, Depreciation, Rentals > Sales, Trades, Exchanges
next pageNext Page:  Small Business/Self-Employed/Other Business > Form 1099-MISC & Independent Contractors
 Use previous pagenext page to find additional instances of index items.