Frequently Asked Questions

Disregarded Entities

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What does the term ‘disregarded entity’ mean?

All single-member (sole proprietorship) LLCs are, by default, considered disregarded entities. An exception can be made if you file Entity Classification Election (Form 8832), where you elect to be treated as a corporation for tax purposes. All foreign-owned LLCs with more than one member must register as a C-corp.

Some of the advantages of being a single-member LLC (disregarded entity) is as follows:

Pass-through taxation

This means your LLC’s income and expenses pass through the company to you as an individual, which means they are required to be reported on your individual tax return.

No corporate or personal tax obligations in the USA if you do not have ETOB or FDAP transactions

You are likely to have no US tax obligations if you meet the above requirements.

Simple tax filing

You do not need to keep receipts or complex accounts.

Limited Liability

The status of disregarded entity only applies at the federal level, not the state level, where it remains a separate entity and thus retains all the liability advantages of an LLC. This means that assets owned by the LLC are protected from any claims a creditor may have on the property of the LLC’s owner.