Multi-Member LLC Taxation

[Miguel Feliciano]

I recently filed for an LLC with the state of Florida that includes myself and two others.

When filing for an EIN, if I choose to be taxed as an S Corp (form 2553); will my LLC become an S Corp or remain as an LLC with S Corp taxation?

I have already made offers on two properties as the LLC, will this have to change?

I've only ever had an LLC as the sole member and getting an EIN was easy. This is the first time I'm experiencing the problem with taxation.

[Louis Alvarez]

Miguel,

If you file Form 2553, your LLC will be taxed like an S-corp even though legally it is an LLC. If you don't file the Form 2553 you will be taxed as a partnership. Your plans and the type of investing you will do will determine which is better for you.

If you choose to remain a partnership you REALLY need to have an attorney prepare an operating agreement to document how you and your partners plan on running the business. One of the most important things you can do with a LLC/partnership is to decide how you will unwind the entity if things go south. You want that agreed on between all the partners BEFORE you get too far down the road.

Making an S -Election for an LLC is quite common so don't sweat it if you did. In most situations these days that would be the way to set up an S-Corp anyway (i.e. form LLC and make an S-election.) There are some different nuances between Partnerships and S-Corps so you probably want to sit down with your CPA and let him/her know what your plans are for the entity before you get too far along.