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.



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