The Virginia Limited Liability Company (LLC) offers the most tax options as compared to other legal entities. Tax classifications for a Virginia LLC depend on the number of members that the Virginia LLC has. The default tax classification for a single member LLC is a “disregarded entity” which means that for tax purposes only, the Virginia LLC is taxed as a sole proprietorship. Accordingly, the Virginia LLC’s taxes are passed through to the single Member’s personal tax return (typically on a Schedule C to the return). For a multi-member LLC, the default tax classification is partnership taxation. With partnership taxation, the tax structure is still one level of taxation which passes through to each Member’s personal tax return. However, the process and the forms used are slightly more complex. A Virginia LLC, regardless of the number of members, can make an election to be taxed as a C corporation instead of the default structure. Also, if the Virginia LLC and its members, meet the S corporation requirements, an election to be taxed as an S corporation is also available to a Virginia LLC. Tax structure can be quite complicated and the different tax choices offer different tax benefits and disadvantages. Accordingly, if you need assistance, it is recommend you speak to your CPA to determine the best tax structure for your Virginia LLC. You do not need to make this decision immediately at formation of your Virginia LLC. You can form your Virginia LLC and make the decision afterwards.

One advantage of the Virginia Limited Liability Company (LLC) entity type is that the Virginia LLC can choose among several tax options. At formation, if LLC members are not ready to elect a tax classification for the Virginia LLC business, they can just choose the default classification of purposes of obtaining an EIN#. With a single member Virginia LLC, the default is “disregarded entity” in which the taxes are handled on the member’s tax return via Schedule C. With a multi-member Virginia LLC, the default classification is partnership taxation. Generally, you have 75 days after formation of a Virginia LLC to make an election to be taxed as a Corporation. We suggest that you consult with an accountant to confirm this information as the IRS changes its rules often. A competent tax accountant can recommend the best tax classification for your business. Please know that any choice of taxation for a Virginia LLC is not set in stone. A Virginia LLC may change its tax structure each year. Please note there may be tax consequences and there are specific timeframes each year for when you would want to change the tax structure of a Virginia LLC.

Yes. Tax classifications for a Virginia LLC can be changed each year. There are specific time frames for changing a Virginia LLC's tax classification each year (generally for federal purposes, no later than 75 days after the commencemnt of each tax year). Also, there may be tax consequences resulting from a change so you should consult a CPA to understand the implications.

In Virginia, the IRS views a husband and wife as two separate people regardless of marriage and so a Virginia LLC where both the husband and wife each own an ownership interest is treated as a multi-member LLC for tax purposes. This results in the default tax classification being the partnership tax structure. Some husbands and wives decide to have their LLC legally owned only by one of them in order to obtain sole proprietorship taxation. Please note that this answer is different in other states where a state ia governed by community property laws such as Arizona California Idaho Louisiana Nevada New Mexico Texas Washington Wisconsin.

The taxation related to Internet based businesses is still an open issue. For federal taxation purposes the taxes you pay are based on the business profits regardless of your location. States vary widely on the treatment of Internet based sales. Internet businesses typically pay taxes only in the state(s) in where they are actually conducting business and those where they have operations. Again, states vary on the definition of "conducting business." The general guideline is that you would be liable for state and/or local taxes if you have a building or office or employees or agents in those other states. Some states have challenged the sales activity regardless of the level of business operations. Because this is an open legislative issue, you should consult with a CPA to learn more about the tax implications for your business. A CPA will be able to provide advice and consultation for your business. You can also contact the state and local taxation authorities. They will be able to provide more guidance on the rules in each state.

The only entity that the IRS does not require an EIN is a single member LLC that doesn’t have any employees. Multi-Member LLCs or any entity that has employees and withholds taxes is required by the IRS to have an EIN. Many single member LLC owners that don’t have employees still obtain an EIN for their business because a tax ID is required to conduct business (for example, opening a bank account) and they won’t have to use their personal social security number.