When a business is formed as an LLC, its members must also decide its tax classification, which is how they'd like the IRS to treat it for tax purposes. For example, LLCs classified as a partnership are taxed as a partnership. Payroll providers use an LLC's classification to determine which tax returns the LLC must file, and which taxes apply to the LLC (and its owners).
When providing your LLC's classification in Zenefits, make sure to use the classification that's on file with the IRS.
- By default, the IRS will consider LLCs with more than one owner to be a partnership, and those with a single owner (a sole-proprietor) to be part of the owner's personal tax returns (a "disregarded entity").
- LLCs who do not want to accept the IRS' default classification can also file Form 8832 to have the IRS classify the LLC as a C or S corporation for tax purposes.
For more information, see the IRS guide to LLCs.