By TurboTax If you operate your business using a limited liability company (LLC), then you have more flexibility in how the IRS taxes your business earnings. IRS default designationsImmediately after you create the LLC, the IRS automatically treats your business as a partnership, but only for income tax purposes. However, if you are the sole owner of the LLC, then you must pay tax on business profits as if you were a sole proprietor. Both designations have different tax filing rules. If you prefer the tax filing rules of a corporation, then you have the option to elect corporate tax treatment …