A limited liability company is a form of business entity. It provides limited liability protection for owners who do not want to risk their personal assets. The Internal Revenue Service (IRS) allows LLCs to be taxed as a partnership or as a corporation, or as an entity disregarded as separate from its owner for income tax purposes.
By default, if LLC does not elect its tax classification and it has more than one member, it will be treated as a partnership for tax classification. Partnership tax passes the liability to each partner personal tax. For example, partnership distributes profits equally among two partners and send Form K-1 to each partner. The partners then report their divided profits in their individual income tax return. If the LLC only has one-member, by default, IRS will consider it as a disregarded entity. The member will have to pay income tax in his/her personal tax return.
LLC can elect to be taxed as a C Corporation or an S Corporation by filing Form 8832. LLCs can make the election at any time of their existence. However, once election is done, an LLC has to wait 60 months before electing a different tax classification.