Small business owners have several choices of business structures, including sole proprietorships, corporations, and LLCs. All offer various advantages. One of the benefits that LLCs offer is flexibility in taxes. As an LLC, you can choose to file taxes as a Corporation, or as a Partnership or Sole Proprietorship, depending on your situation. In some cases, you can even determine which kind of corporation you want to be taxed as.

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In order to file taxes as a Corporation, you must petition the IRS. Once approval of your petition is granted, you must file as a Corporation each year unless you petition for another filing form. The IRS does not provide precise standards for how many times you can petition to change your LLC’s tax status. But be cautious about filing multiple petitions; the IRS is unlikely to grant multiple requests for filing form changes, particularly if it believes your only reason for making the request is to get a better tax rate.

There are some exceptions to the taxing flexibility allowed to LLCs. If your LLC is already a Corporation before it is designated as an LLC, then you will have to pay corporate taxes. Some businesses have attempted to get out of increased corporate tax rates by transforming themselves into LLCs; the government no longer allows them to do this. However, you can appeal to the IRS for a different corporate filing, for instance to have your incorporated LLC taxed as an S Corporation rather than a C Corporation.

If you have questions about how your LLC is taxed, it’s best to speak to an accountant as well as a business lawyer, because the form you choose may affect your liability as well as your taxes.

Get started Start Your LLC Answer some questions. We’ll take care of the rest.

Get started Start Your LLC Answer some questions. We’ll take care of the rest.