CF 1997-01 - IRS "check-the-box" entity
selection regulations - August 19, 1997
Recently-promulgated IRS regulations regarding entity
selection (often referred to as the "check-the-box"
regulations) generally permit unincorporated
(limited liability companies and partnerships) to choose
(elect) whether to be treated for federal income tax purposes
as partnerships or as corporations.1 If such
unincorporated entities do not affirmatively choose (elect)
either form, then the "default" is generally the partnership
Under Ohio Revised Code section 5733.01, if an LLC or a
partnership with Ohio nexus defaults or chooses to be treated
as a partnership for federal income tax purposes, then the
entity generally will not be taxed as a
corporation for Ohio corporation franchise tax
purposes.2 If an LLC chooses to be treated as a
corporation for federal income tax purposes, then the LLC
will be taxed as a corporation for franchise tax purposes.
See ORC section 5733.01. If a partnership chooses to be taxed
as a corporation for federal income tax purposes, the
partnership will be subject to the Ohio franchise tax for
taxable years ending after September 28, 1997.3
If you have any questions regarding this matter, please
contact the Income Tax Audit Division at 614-433-7608.
1Corporations, however, cannot choose to be
treated other than as corporations (C corporations or S
2However, if the entity is a one member LLC and if
the entity defaults to or chooses the noncorporate tax
status, then the entity will be treated either (i) as a
division if the LLC's member is a corporation or partnership
or (ii) as a sole proprietorship if the LLC's member is an
estate or an individual.
3The recently enacted budget bill, Am. Sub. H.B.
215, 122nd General Assembly, amended ORC sections 5733.01(E)
and 5733.01(F) to state that if a "for profit" entity is
taxed as a corporation for federal income tax purposes, then
the entity is treated as a corporation for Ohio franchise tax
Section 222 of the budget bill states that the amendments to
ORC section 5733.01 take effect "on the ninety-first day
after the act is filed with the [Ohio] Secretary of State."
The ninety-first day is September 29, 1997.