Per Diem Rates from the U.S. General Services Administration
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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
Making a Business Classification Election for an LLC
After your LLC is created you can make one of three decisions:
- Do nothing and be taxed according to the default tax treatment that applies to your LLC. You're not required to make an entity classification election. The default classification of an LLC refers to how the LLC will automatically be taxed if no entity election is made. The following tax treatment will automatically apply in no entity election is made:
- Single-Member LLC: A default classification of sole proprietorship applies and the owner files Schedule C to report business income and expenses.
- Multiple-Member LLC: A default classification of partnership applies and Form 1065 must be filed annually to report income and expenses. Form 1065 is an information return; no tax liability is deterimined on this form. LLC members each receive Schedule K-1 from the partnership. The K-1 reports each member's share of the partnership's income, deductions, credits, gains and losses and reportes such items on their individual income tax return.
- Elect C corporation tax treatment by filing Form 8832.
- Elect S corporation treatment by filing Form 2553. (Note that the IRS does not require Form 8832 to be filed if an an LLC elects S corporation tax treatment. Only Form 2553 need be filed.)
Although an LLC is a legal form of business, subject to the laws of the state of formation, the IRS does not recognize an LLC as a business category for federal income tax purposes. The IRS recognizes three business categories for federal Income tax purposes:
- Sole proprietorship
- Partnership
- Corporation
Unlike a corporation, where you must be in control (own at least 80% of all the stock) right after an exchange of property for stock to get tax-free treatment, there is no control requirement to get tax-free treatment for an LLC that is treated as a partnership for federal tax purposes.
Multiple-member LLC
IRC Section 721 of the Internal Revenue Code applies to exchanges of property for an interest in a partnership.
IRC Section 721(a) states that no gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership. Section 721 has no control requirement.
Since an LLC with two or more members is treated as a partnership for federal tax purposes, Section 721 applies to multiple-member LLCs. This means, an LLC member's interest in the business may be as little as 1%, or as much as 99%, and still receive tax-free treatment in an exchange of property for an interest in the LLC.
Single-person LLCs
A single-person LLC is treated as a sole proprietorship for federal tax purposes. A sole proprietorship is not a separate legal entity; the owner and the business are considered one and the same. Gain or loss on personal-use property converted to business use in a sole proprietorship is recognized only when such property is disposed of.