A domestic LLC is an entity:

• Formed under state law by filing articles of organization as an LLC.
• Where none of the members of an LLC are personally liable for its debts.

For federal income tax purposes, an LLC may be classified and taxed as a sole proprietorship (single member), partnership (multi-member), or a corporation (single or multi-member).

Generally, if a domestic LLC has:

• Only one owner, the IRS will by default treat it as if it were a sole proprietorship (disregarded entity) unless the owner makes an election to have it treated as a corporation.
• Two or more owners, the IRS will by default treat it as a partnership unless the entity makes an election to have it treated as a corporation. Special rules exist for an LLC wholly owned by a married couple in a community property state, under which the LLC may be treated as a sole proprietorship (disregarded entity) notwithstanding that it has two owners.

An LLC may elect to be classified as an association taxable as a corporation or an S corporation (assuming the LLC otherwise satisfies the S corporation requirements). Use Form 8832, Entity Classification Election to make an election to be an association taxable as a corporation. Use Form 2553, Election by Small Business Corporation to make an election to be an S corporation. If a taxpayer doesn't file Form 2553 or Form 8832, the default classification rules will apply. Under Treas. Regs. Section 301.7701-3(c)(1)(v)(C), an eligible entity that timely files Form 2553 to elect to be an S corporation is deemed to have made an election to be classified as an association taxable as a corporation (assuming the entity satisfies the S corporation requirements). Different classification rules may apply in certain situations for certain types of businesses, including banks, insurance companies, and nonprofit organizations that are also organized as an LLC.

Note: If an LLC that is otherwise disregarded has employees, the law treats it as an entity separate from its owner for reporting and payment of employment taxes.