There’s always a little confusion when it comes to LLC taxation. The IRS doesn’t have LLC taxation. Instead, it lets you choose how Mr. LLC will be taxed.
He can be taxed as a sole proprietor, partnership, an S corporation, or a C corporation. So if you’re the only owner of Mr. LLC you can choose to be taxed like a sole proprietor or an S corporation. If you have multiple members, you can choose to have Mr. LLC taxed as a partnership or an S Corporation and even a C corporation (it rarely makes sense to be taxed as a C corporation). You’ll need to make sure that your operating agreement includes provisions that address certain tax issues depending on what tax selection you make.
There are also state tax regulations and social security taxes to take into consideration. You should talk with your accountant about your tax election. The choice you make may save you thousands of dollars or cost you thousands of dollars. For example, if you earn income from your capital investments or from the work of your employees, then you might want to consider choosing S corporation taxation.