If you are not familiar with Taxes and Accounting please pass on this one:

A LLC (limited liability company) is the fasted growing entity form used by both small and large businesses. S corporations continue to have the greatest number of tax filings every year.

SOURCES:

Treasury Regulation 301.7701-3 Entity Classification, including (b)(1), (c)(1), (c)(1)(v)(C)

Revenue Procedure 2002-69

BOTH MAY BE FOUND WITH A GOOGLE SEARCH (e.g., Treasury Regulation 301.7701-3)

REQUIRED USE THE CITATIONS ABOVE TO ANSWER THESE QUESTIONS, AND INDICIATE WHAT AUTHORITY SUPPORTS THE ANSWER

5. Based on your conclusions above, if an individual wants an entity to operate a business, and wants that entity to be taxed as an S corporation, what entity choices are available to the individual?

Addintional information:

The tax law allows an LLC to elect to be classified as a corporation (association status). If someone forms an LLC but wants it to be treated as an S corporation, how is the election to treat an LLC as an S corporation made?

Use IRS Form 2553 to file this election. This form provides the IRS with detailed information about the corporation requesting S corp status and about the corporation's eligibility for electing this status.

The IRS has 8 qualifications for S Corporation status, including:

It must be a domestic (U.S.) corporation, with no foreign investors;

It must have no more than 100 shareholders;

It has only one class of stock;

It must use a December 31 year-end.

The IRS requires that the Sub-chapter S Election be filed no more than two months and 15 days after the beginning of the tax year the election is to take effect. For a startup, this means the first year of the business.

2. How does the tax law classify an LLC with one owner?

Section 301.7701-2(a) defines the term business entity as any entity recognized for federal tax purposes (including an entity with a single owner that may be disregarded as an entity separate from its owner under 301.7701-3) that is not properly classified as a trust under 301.7701-4 or otherwise subject to special treatment under the Code. (https://www.irs.gov/pub/irs-drop/rp-02-69.pdf)

An LLC with only one member is classified as an entity disregarded as separate from its owner for income tax purposes (but as a separate entity for purposes of employment tax and certain excise taxes), unless it files Form 8832 and affirmatively elects to be treated as a corporation. If LLC is not elecgted to treat as corporation than its activity would be reflected in owners income tax return (https://www.irs.gov/businesses/small-businesses-self-employed/single-member-limited-liability-companies)

3.Based on the foregoing, in a community property state such as Texas, community property ownership can result in two owners in an LLC even if one spouse thinks the LLC is theirs alone. How does the tax law deal with community property ownership when classifying a business entity such as an LLC?

Under the Texas State Community property law, all of the assets that are acquired by either of the spouses during marriage are to be divided as just and right after divorce except that of separate assets such as property inherited by only one spouse, property acquired before marriage etc.

So as the closely linked business or LLC that is divided into equal portions between both the spouses.