LLC Taxed as a C-Corp: Form 1120 and the C-Corp Election

An LLC is flexible: it can keep its default pass-through taxation, or it can elect to be taxed as a corporation. This guide covers the C-corporation election, the Form 1120 it requires, and when that trade-off is worth it.

Default vs Elected Taxation

By default, a single-member LLC is a disregarded entity and a multi-member LLC is taxed as a partnership (Form 1065). Both are pass-through: profit is taxed once, on the owners' returns. An LLC can instead elect to be taxed as a corporation. See how LLCs are taxed for the full picture.

How to Elect C-Corp Status

To be taxed as a C-corporation, the LLC files Form 8832 (Entity Classification Election) with the IRS. The election has an effective date, and once made, the LLC is treated as a corporation for federal tax until it changes the election.

What Is Form 1120?

Form 1120 is the US Corporation Income Tax Return. After a C-corp election, the LLC files Form 1120 each year and pays corporate income tax at the flat 21% federal rate. Unlike Form 1065 or Form 5472 (information returns), Form 1120 calculates and pays actual tax.

Double Taxation

A C-corp pays tax on its profits, and shareholders pay tax again on dividends they receive. This double taxation is the main drawback compared with a pass-through LLC, where profit is taxed only once.

When It Makes Sense

• You plan to raise venture capital and investors expect a corporation
• You want to retain profits in the business to reinvest rather than distribute them
• You want to offer certain employee stock or benefit plans
• The 21% corporate rate is lower than the owners' personal rates and profits stay in the company

C-Corp vs S-Corp Election

These are different elections. A C-corp election (Form 8832) makes the LLC a separately taxed corporation with double taxation. An S-corp election (Form 2553) keeps pass-through taxation but can cut self-employment tax. Compare the trade-offs in our LLC vs S-corp guide.

How StartGlobal Helps

StartGlobal handles federal tax filing, including corporate returns for LLCs that have elected C-corp taxation, with non-resident owner filings handled. Federal tax filing is priced by revenue as an a la carte service, and is also part of the fully-managed plan at $149/month. If you are unsure which election fits, our team can help you decide before you file.

Frequently Asked Questions