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An eligible entity uses Form 8832 to elect how it will be classified for federal tax purposes, as a corporation, a partnership, or an entity disregarded as separate from its owner.
A disregarded entity refers to a business entity with one owner that is not recognized for tax purposes as an entity separate from its owner. A single-member LLC (SM LLC), for example, is considered to be a disregarded entity. As the result of being disregarded, the SM LLC does not file a separate tax return.
Taxpayer Identification Number When filing for income tax, the owner of a single-member LLC treated as a disregarded entity must use the owner's Social Security number, or if she has one, the owner's separate EIN, on all returns and forms related to income tax., even if the LLC has its own EIN.
Taxpayer Identification Number. For federal income tax purposes, a single-member LLC classified as a disregarded entity generally must use the owner's social security number (SSN) or employer identification number (EIN) for all information returns and reporting related to income tax.
Pros of a Disregarded Entity If you have a disregarded entity, all of your LLC's income and expenses will get reported on your personal tax return on Schedule CNO different from how a sole proprietor would report business income and expenses. You'll pay taxes on the business's income at your personal income tax rate.
If a Single-Member LLC has not made an election to be taxed as a Corporation, it is automatically a Disregarded Entity and the IRS looks through the LLC and taxes it the same way its owner is taxed. If a Single-Member LLC is owned by an individual, it will be taxed as a Sole Proprietorship.
To elect Corporation status, the LLC must file IRS Form 8832 — Entity Classification Election. To elect S Corporation status, the LLC must file IRS Form 2553 — Election by a Small Business Corporation.
Entity classification election. From Wikipedia, the free encyclopedia. For United States income tax purposes, a business entity may elect to be treated either as a corporation or as other than a corporation. This entity classification election is made by filing Internal Revenue Service Form 8832.
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