Arizona LLC Taxation

In terms of federal taxation, an Arizona LLC can be taxed pursuant to one of four (4) tax regimes: 1) Subchapter K, 2) as a disregarded entity, 3) Subchapter C, 4) Subchapter S.

1) Subchapter K

A multiple-member Arizona LLC is, by default, classified as a partnership by the IRS, meaning that it is taxed pursuant to Subchapter K of the Internal Revenue Code ("IRC"). The means, among aother things, that there is only one level of federal taxation associated with the profits of the LLC. In particular, the profits are passed through to the members of the LLC as opposed to paying tax at the LLC-level.

In addition, taxation under Subchapter K is very flexible in terms of contributing and distributing property and generally allows LLC members to recognize no gain or loss associated with either events.

2) Disregarded Entity

A single-member LLC is, by default, classified as a disregarded entity by the Internal Revenue Service and generally doesn't need to file its own federal income tax return; rather, the single member includes the LLC's profit on his/her federal income tax return, often using Schedule C.

If the owner(s) of an LLC would rather not be taxed via the default classification by the IRS, the LLC can elect to be taxed either under Subchapter C or Subschpater S of the IRC.

3) Subchapter C

Subchapter C iof the IRC is often known as corporate taxation and consits of two levels of taxation: a) corporate level and b) shareholder level. While an LLC can elect taxation under Subchapter C, very few do because taxation under Subchapter C is not often advatageous to businesses.

4) Subchapter S

An LLC can elect taxation under Subchapter S of the IRC, which is often associated with Subchapter-S corporations or s-corps. Unlike a taxation under Subchapter C, which includes two level of taxation, there is only one level of taxation under Subchapter S. In addition, there are other advantages to taxation under Subchapter S, e.g. reducing self-employment taxes.

This brief overview of some important considerations associated with Arizona LLC taxation is by no means comprehensive. Always seek the advice of a competent professional when making important legal decisions.

Arizona LLC AttorneyDouglas K Cook is an Arizona llc lawyer with over 40 years of experience as a practicing attorney. Although Douglas K Cook's office is located in Mesa, Arizona, he represents clients throughout the Phoenix, Arizona Metropolitan area including the following east valley cities: Scottsdale, Paradise Valley, Tempe, Chandler, & Gilbert.

Contact Us

If you are a current client of this firm, please do not send confidential or otherwise sensitive information via this site. Further, if you are not an existing client of this firm, unsolicited emails containing confidential or sensitive information cannot be protected from disclosure as no attorney-client relationship exists.