Look at basis for tax purposes, not FMV
FMV is important for substantial economic effect
Defining Entities
I. History
a. Corp used to be 4 factor analysis. Now check-the-box to opt in unless default in. i. Asked: Corporate resemblance test no longer relevant
II. Classifying Partnerships for Tax Purposes
a. Two or more members: pship or corporation 7701-2(a) i. Default = partnership 7701-3(b)(1)(i)
1. Applies to LLCs
2. To opt out of default  Check-the-box
3. Look to state law; If state law corp = corp for tax 7701-2(b)
b. One Member: Corp or DRE 7701-2(a) i. Default = Disregarded entity 7701-3(b)(1)(ii)
1. If state law corp = corp for tax 7701-2(b)
2. SMLLC can’t be Pship = DRE
III. Reclassification
a. 7701-3(g) Election to Convert PS to Corp for Tax i. No tax ii. Deemed contribution of pship assets to corp, followed by liquidation
b. PTPs: taxed as corporations i. PTP – publicly traded partnership. 7704
c. Election to Convert Corp to PS i. Deemed liquidation and trigger tax at that time
d. Add member to single member corp of LLC and subject to PS tax rules
e. Lose member and become single member, then DRE

LLC | GP | LP | C-Corp | S-Corp | | Annual registrationForeign State qualificationStatutory organization and formationAnnual stockholders and directors meetings in corporations (not in LLC) Check | No statutory formation process. May inadvertantly form and have vicarious liability. Do everything in WRITING!!!Check | Formal statutory formation and