Question: Can a single member limited liability company be taxed as a partnership for federal income tax purposes?
Answer: No. The following text from the IRS’ website answers the question:
“Over the years, there has been confusion regarding Single Member Limited Liability Companies in general and specifically, how they can report and pay employment taxes.
An LLC is an entity created by state statute. The IRS uses tax entity classification, which allows the LLC to be taxed as a corporation, partnership, or sole proprietor, depending on elections made by the LLC and the number of members. An LLC is always classified under federal law as one of these types of taxable entities.
A multi-member LLC can be either a partnership or a corporation, including an S corporation. To be treated as a corporation, an LLC has to file Form Form 8832, Entity Classification Election (PDF), and elect to be taxed as a corporation. A multi-member LLC that does not so elect will be classified under federal law as a partnership.
A single member LLC (SMLLC) can be either a corporation or a single member “disregarded entity.” Again, to be treated under federal law as a corporation, the SMLLC has to file Form 8832 and elect to be classified as a corporation. An SMLLC that does not elect to be a corporation will be classified by the existing federal guidance as a “disregarded entity” which is taxed as a sole proprietor for income tax purposes.”
IRS Form 8832 is the form used by an entity to elect a method of federal income taxation that is different from the IRS’ default method (sole proprietorship or disregarded entity for single members LLCs and partnership for multi-member LLCs). This form is also known as the “check the box” form because an entity can elect a tax method by checking the box on the form. IRS Form 8832, question 3 reads:
“Does the eligible entity have more than one owner?
Yes. You can elect to be classified as a partnership or an association taxable as a corporation.
No. You can elect to be classified as an association taxable as a corporation or to be disregarded as a separate entity.”