Three Members Form an LLC in the Current Year

question 37

Multiple Choice

Three members form an LLC in the current year. Which of the following statements is incorrect?

• A)The LLC's default classification under the check-the-box rules is as a partnership.
• B)The LLC can elect to have its default classification ignored.
• C)The LLC can elect to be taxed as a C corporation with no special tax consequences.
• D)If the LLC elects to use its default classification, it can elect to change its status to being taxed as a C corporation beginning with the third tax year after the initial classification.

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Definitions:

Agreements

Contracts formed between two or more parties outlining terms and conditions regarding a specific matter or transaction.

Contracts

Legally binding agreements between two or more parties that outline terms and conditions for the exchange of services, goods, or obligations.

Equitable Remedy

A type of judicial relief that requires a party to act or refrain from acting in a certain way, often employed when monetary damages are insufficient for justice.

Imposed

Something that is enforced or applied authoritatively, often without the consent of those affected.