UNLIMITED TAX LIABILITY: A COMMON MISNOMER OF LIMITED LIABILITY COMPANY TAXATION IN THE UNITED STATES

Jonathan R. Everhart

Abstract


Since its existence, the limited liability company (LLC) has become a commonly selected business entity structure in the United States. One of the major advantages of this entity structure is the limited personal liability provided to the owners of the business. A common misnomer however among business owners whom structure their business as an LLC is the notion that the limited liability protection extends to shielding them from being personally liable for the taxes of the business. This misnomer leads business owners to unexpectedly face personal tax liabilities and related repercussions. This article highlights this widespread issue and provides guidance to domestic and foreign business owners on the appropriate United States federal tax guidelines applicable to LLC taxation. The article also addresses the new regime of tax audit rules under the Bipartisan Budget Act of 2015 that impact LLC tax liability.

Keywords


Tax Liability; LLC; Partnership

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 University of Houston-Clear Lake