As is well known, a limited liability company (LLC) is a hybrid with the structural features derived heavily from corporate law and with the income taxed as a partnership1 unless the check-the-box option is employed2 to shift taxation to that of an “association”3 which is basically corporate tax treatment.4 The regulations make it clear that the tax treatment of a change in classification of an entity for federal tax purposes is determined under the Internal Revenue Code :. . . and general principles of tax law.”5 Moreover, if an LLC commences operation under the so-called “default” provision (taxed as a partnership), as is often the case because of the likelihood of start-up losses, especially in the early years of the entity), the initial operating agreement typically reflects partnership tax treatment. A later election to shift taxation as an association with a filing of Form 8832 may require amendments to the operating agreement in implementation of the shift in classification to corporate tax treatment.
Harl, Neil E.
"Reviewing Authority in Handling LLC Losses,"
Agricultural Law Digest: Vol. 26
, Article 1.
Available at: https://lib.dr.iastate.edu/aglawdigest/vol26/iss14/1