The term disregarded entity is thrown around at business meetings all the time, especially when it comes to tax meetings. So what is this disregarded entity thingy anyway?

A disregarded entity is any kind of business structure that is filed on your personal taxes or on the taxes of a parent entity such as a Corporation. Normally this is an LLC that has one partner or a sole-proprietorship.

So why would you want a business structure that will be ignored when it comes to taxes? To be honest, the only time I like to use disregarded entities is if the owner is either a corporation, or another business entity. However, they do have some powerful uses. One of the most common is, if you own real estate and have it in an LLC. This then is reported on your personal return and there is no cost to have a second business return filed.

If you are confused as to which business entity to choose give us a call and we will help you out. We also have some videos on the choice of a business entity on our Business Training website: