Employment taxes assessed in SMLLC's name and EIN were valid assessments against company's sole owner.

• Author: Fiore, Nicholas J.
• Position: Single member limited liability company; employer identification number

X, a single member limited liability company (SMLLC), is a limited liability (LLC) company formed under state law. It is a disregarded entity for all Federal tax purposes and its activities are treated in the same manner as a sole proprietorship, branch or division of its sole owner T,' see Regs. Sec. 301.7701-2(a). X filed delinquent employment tax returns showing liabilities for 1998, 1999 and March 31, 2000.

Each of the returns was filed with T's address as the business address for X. In addition, the certificate of X's formation shows T's address as X's business address.

All of the delinquent employment tax liabilities associated with the Forms 940 and 941 were assessed under X's employer identification number (EIN) and under the name X, as evidenced by the Certificates of Assessments and Payments for each of the periods at issue. Further, the address to which each notice was sent is the business address of X, which also happens to be T's home address. The Service filed a Notice of Federal Tax Lien against X for the delinquent amounts.

Analysis

Regs. Sec. 301.7701-2(a) provides that a business entity with a single owner is classified as either a corporation or disregarded as an entity separate from its owner. For purposes of these regulations, an SMLLC is treated as a business entity. Certain business entities are always classified as corporations; those business entities not automatically classified as corporations (eligible entities) are permitted to choose their classification for Federal tax purposes. All SMLLC is considered all eligible entity and may choose its tax classification. If an SMLLC does not choose its tax classification, the default classification for all Federal tax purposes is that of all entity disregarded as an entity separate from its owner. If an SMLLC is disregarded, its activities are treated in the same manner as a sole proprietorship, branch or division of the owner.

Notice 99-6 permits an SMLLC to separately calculate, report and pay its employment tax obligations for its employees under its own name and EIN. The notice makes clear that the owner of an SMLLC treated as a disregarded entity for Federal tax purposes is the employer for employment tax liability purposes. Consequently, the owner retains ultimate responsibility for the employment tax obligations incurred for employees of the disregarded entity. Thus, as a disregarded entity, X cannot be the employer for employment tax purposes, regardless of the...