WHAT ARE THE TAX CONSEQUENCES OF VARIOUS COMPANY STRUCTURES?
WARNING: The following is only a very broad overview of the tax treatment of certain business entities under the Internal Revenue Code and its regulations. It is for informational purposes only and is not legal or tax advice. Do not take any action based on the following without first consulting with a qualified tax advisor. Benefits of Disregarded Entity Tax Treatment Disregarded entities are unique in that, although they are separate entities for legal purposes (thus affording us asset protection), they are treated as nonexistent for tax purposes. In other words, the activity of the entity is, for tax purposes only, treated as the activity of its owner(s). Because of this, income from a disregarded entity is reported on its owner(s)’ personal tax return as sole proprietorship income (if the owner is a natural person, then the income is reported on their 1040 Schedule C income tax return.) This allows disregarded entities to do certain things that no other entity can do. For example:
