Get 18220.fh11. Entity Classification Election

Eligible Entity. A business entity that is not a per se corporation. Hybrid Entity. An entity that is considered to be a pass-through entity for U.S. tax purposes and a taxable corporate entity. (association) in the tax jurisdiction of its organization.

LLCs are classified as pass-through entities for tax reasons, meaning the business profits and losses will flow through to the personal tax return of each member. An LLC can also elect to be taxed as an S-Corporation or a C-Corporation. To be taxed as an S-Corporation, the LLC must file IRS form 2553.

The instructions appear to mean that the election may be filed within a year before it is to be effective or within 75 days after the date it is to be effective. Thus, with a newly formed entity, this form should be filed within 75 days of the start of the fiscal year of the entity.

If you're an LLC or partnership, use Form 8832 if you want to be taxed as a C-corp, partnership, or a sole proprietor. Meanwhile, Form 2553 is for LLCs or corporations that want to be taxed as S-corps. Keep this in mind: If you're filing Form 2553, you don't need to file Form 8832.

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 new eligible entity should not file Form 8832 if it will be using its default classification (see Default Rules below).

A "domestic eligible entity" is any business entity not required to be a corporation under Proposed Regulation 301.7701-2(b). Entities required to be corporations include those referred to by a state statute as incorporated, joint-stock companies, banks, and insurance companies.

Form 8832 must be filed between one year prior and 75 days after its effective date. Most LLCs want their Form 8832 to be effective for their first tax year, so the form must be filed no sooner than one year and no later than 75 days after beginning business.

No. You do not need to file Form 8832 unless you want your single-member LLC to be classified as an entity disregarded as separate from you (such as a corporation).

Definition & Examples of a Business Entity A business entity is an organization that's formed to conduct business. The type of business entity formed determines how a business is taxed and its exposure to liability. Learn more about how business entities work.