A Disregarded Entity means your business has a single owner, is a separate legal entity from you, and has not elected to be taxed separately. The company or organization is "disregarded" as being separate from its owner for tax purposes. A disregarded entity is different than a corporation. See the different Single-Member LLC options here.
As a Disregarded Entity:
- You have the same tax obligations as a sole proprietorship
- You can protect your personal assets from business liabilities with this structure.
- The entity's assets are treated separately from the owner's assets.
- Legal action against the entity is less likely to affect the owner's assets, and legal action against the owner is less likely to affect the entity's assets.
- No need to file a separate business tax return
- Activities in the LLC should also be reflected on the owner’s federal tax return
- You can use your Social Security Number when filing for taxes if you don’t have employees
Make sure to file the necessary returns and filings with your state. For federal taxes, it will depend on whether your Single-Member LLC is considered a “disregarded entity” by the IRS or if you elect to be a corporation.