What disregarded entity means
- LLC income flows directly to owner (no separate LLC tax return for income purposes)
- Owner reports income on their personal return (if any US tax obligation)
- LLC retains separate legal existence for contracts, liability, banking
- Form 5472 + pro forma 1120 still required (information return)
- EIN still required for banking, payment processors, government interactions
Single-member LLC default
Under Treas. Reg. 301.7701-3, a single-member LLC is disregarded for federal tax by default. The LLC can elect C-Corp treatment via Form 8832, but rarely should (creates double taxation). For foreign-owned single-member LLCs, disregarded status combined with non-resident owner means most non-ECI income owes $0 US tax.
Multi-member LLC default
Multi-member LLCs default to partnership tax treatment (not disregarded entity). Partnership files Form 1065 and issues K-1 to each member. Can elect C-Corp via Form 8832 but rarely should. Disregarded entity status only applies to single-member LLCs.