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Disregarded entity

A disregarded entity is recognized by state law as a separate legal entity (e.g., a single member LLC) but not for U.S. federal income taxes.

Single member LLCs are disregarded entities because the owners of these corporations report the company’s income on their personal tax returns.

Corporations are generally an example of a business entity that is not disregarded because a corporation generally pays taxes on its profits before distribution to shareholders.

 

EXAMPLE:

My freelancing business is a disregarded entity which sounds like I don’t even care about it.

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