LLC Tax classification

Hey Guys,

I created a new LLC and im trying to understand what types of classification do most of you guys use when applying for an EIN? What are the benefits and draw backs of choosing C, S-corp or Disregarded entity? How about asset protection with the seperate tax type?

Do any of you ever leave it as a disregarded entity? Why would you leave it as such, and on the flip side why wouldnt you leave it as such?

I also understand that once you change it, you cant change it again till 60 months (5 yrs) later, so i want to make sure to get it right.


tax elections have nothing to do with asset protection.

your tax decision will depend on your specific circumstances.

Disregarded entity only makes sense if another entity owns the LLC. They lose much of the liability protection when the member is an individual. Other than that, it’s like Mark says. It depends on your situation.

I dont quite follow… An LLC loses much of the liability protection if the member is an individual, so do you guys have it so that another LLC owns the LLC?

Also, separate from the question above, from a tax perspective, what are the benefits or draw backs of staying disregarded or choosing S-Corp status? If i go disregarded, it goes on my individual taxes, as i understand it, S-Corp does the same thing…

Is there something else i am missing?

Also, do you guys do member managed LLC’s or manager managed LLC’s?

Just all the case law that determines how LLCs are treated in realty. Gurus and promoters push theory. They are too busy scaring the public and selling material to fully learn the topic. Assets can be protected, but it takes much more than just an LLC.

I prefer some kind of holding entity that doesn’t engage in liability-producing business to manage investments. This entity invests in the LLC and appoints a 3rd party to represent its interest. This works for me. Just keep in mind that your plan will crumble unless you can justify why you used a complicated set up. Anything done to hinder or delay the payment of a valid debt is not respected by the courts (e. g. OJ’s book deal) and people think you are up to no good if you don’t have a reasonable explanation.

I prefer manager-managed.