A Disregarded Entity is a business structure, such as a single-member LLC, recognized by the IRS as separate from its owner for tax purposes but treated as a sole proprietorship or branch.
- What is a disregarded entity?
Answer: It is a business like a single-member LLC treated as part of its owner for tax purposes. - What are examples of disregarded entities?
Answer: Examples include a single-member LLC or a qualified subchapter S subsidiary. - How is a disregarded entity taxed?
Answer: Its income is reported on the owner’s personal tax return. - What are the benefits for employers?
Answer: It simplifies tax filing and reduces administrative burden. - What are the limitations?
Answer: It offers no liability protection beyond the owner’s personal assets.
