Checked 9 November 2026. Tax rates and rules change. Your accountant should confirm how they apply to your company.
This page is about United States companies. For the UK, see UK limited companies or UK LLPs. Other US types: C corporations, S corporations, LLCs.
Which tax rules apply
The IRS explains that, by default, a domestic LLC with at least two members is classified as a partnership for federal income tax, and an LLC with one member is disregarded as separate from its owner. Either can file Form 8832 to elect to be treated as a corporation, and an LLC that is treated as a corporation can then elect S corporation status on Form 2553. The IRS says an election generally cannot take effect more than 75 days before it is filed or more than 12 months after. So the first question for an LLC holding bitcoin is which of these it is.
| Classification | Return | Who pays tax on bitcoin gains |
|---|---|---|
| Single member, disregarded | Owner's own return | The owner, as if it held the bitcoin directly |
| Partnership (two or more members) | Form 1065, with a Schedule K-1 for each member | The members, on their distributive shares |
| Elected corporation | Form 1120 | The LLC, at 21% (see C corporations) |
| Elected S corporation | Form 1120-S | Shareholders (see S corporations) |
An LLC taxed as a partnership
A partnership files Form 1065 and gives each member a Schedule K-1 with their share of gains and losses, allocated under the operating agreement within the tax rules. Members are taxed on their shares whether or not cash is distributed. Contributions of property to a partnership are generally tax free under section 721(a). Section 721(b) removes that protection for gain on a transfer to a partnership that would be treated as an investment company, within the meaning of section 351, if it were incorporated. The section 351 list of assets that count towards that test does not mention bitcoin or other digital assets, and the test also turns on whether the transfer diversifies the members' interests, so the answer depends on what each member contributes. It is an open question to raise with the accountant before members put bitcoin in.
A single member LLC
For income tax, a disregarded LLC is invisible: the owner reports the gains and losses. The LLC still matters for liability protection and, under the IRS page, it is treated as a separate entity for employment tax and certain excise taxes. Keep the LLC's bitcoin in wallets that belong to the LLC, not to the owner personally, so the records and the legal position line up.
Broker reporting
An LLC taxed as a partnership or disregarded is not a corporation for the Form 1099-DA exempt recipient rule, so brokers may well issue forms. Basis reporting applies from 2026 to covered units only, so units moved in from the LLC's own multisig will generally have no basis on the form.
Governance
An LLC is run under its operating agreement and state law, not under a board by default. The agreement should say who can approve buying, selling and signing, and how a departing member's share of bitcoin is valued. A treasury policy adopted by the members, or the managers if it is manager managed, fills the gap. If the LLC funds a purchase from retained profits, a capital contribution or a member loan, record which one it is. Classification matters: an LLC taxed as a corporation follows the corporate rules, and an LLC taxed as a partnership has its own contribution and basis rules. See funding a company bitcoin purchase.
Common questions
How is a single member LLC taxed on bitcoin?
By default it is disregarded for income tax, so the owner reports the gains and losses, unless the LLC has elected to be a corporation.
Can members contribute bitcoin to the LLC without tax?
Often, under section 721(a). Section 721(b) has an investment company exception, and how it applies to bitcoin should be checked before contributing.
Does an LLC get Form 1099-DA?
An LLC that is not taxed as a corporation is not an exempt recipient, so brokers may issue forms.
What a state formation filing shows about the members varies by state. See keyholder safety and privacy.
Sources
Primary sources only. Each link was checked on 9 November 2026. Rules change, so confirm the current version with your adviser.
- IRSLimited liability company (LLC): default classification and elections
- Cornell LII (unofficial copy of the CFR)26 CFR 301.7701-3: classification of certain business entities
- IRSAbout Form 8832, Entity Classification Election
- IRSAbout Form 2553, Election by a Small Business Corporation
- IRSAbout Form 1065, U.S. Return of Partnership Income
- Cornell LII (unofficial copy of the US Code)26 U.S.C. 721: nonrecognition of gain or loss on contribution, and the investment company exception
- IRSInstructions for Form 1099-DA (2026): covered securities, basis reporting and exempt recipients
- IRSRevenue Procedure 2024-28: allocating unused basis to wallets and accounts (PDF)
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This is general information and education only. It is not financial, investment, tax, accounting, legal or regulatory advice, and it is not a recommendation to buy, sell or hold bitcoin or any other asset. It does not take account of your circumstances or those of your company. You must obtain your own official professional advice to confirm this information is correct before acting on it.
Rules change. This information is correct to our understanding at the last-reviewed date, but it may be incomplete or out of date, and official sources take precedence. Bitcoin is volatile. A company that buys it could lose some or all of the money it puts in.
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