Why use a disregarded entity?
The use of a disregarded entity can provide limited liability protection for business operations without creating additional federal income tax liabilities or cumbersome filing requirements. While there are many uses of a disregarded entity, the following is a summary of some of the more typical uses of a disregarded entity: • An individual desiring to operate a small business may form a single member limited liability company. The individual owner would achieve limited liability protection from liabilities arising out of the operation of the business and report the income and loss from the business on the individual’s federal income tax return. • An individual desiring to acquire rental property may acquire such rental property through a single member limited liability company. The individual would be able to avoid personal liability for potential environmental clean-up liabilities associated with the rental property as the legal title to the rental property would never be in the indi
A. The use of a disregarded entity can provide limited liability protection for business operations without creating additional federal income tax liabilities or cumbersome filing requirements. While there are many uses of a disregarded entity, the following is a summary of some of the more typical uses of a disregarded entity: • An individual desiring to operate a small business may form a single member limited liability company. The individual owner would achieve limited liability protection from liabilities arising out of the operation of the business and report the income and loss from the business on the individual’s federal income tax return. • An individual desiring to acquire rental property may acquire such rental property through a single member limited liability company. The individual would be able to avoid personal liability for potential environmental clean-up liabilities associated with the rental property as the legal title to the rental property would never be in the i
Related Questions
- The entity is unable to obtain a signed Form PT-AGR or PT-STM from the owner of the disregarded entity. What does it have to do?
- How does a disregarded entity authorize a representative to work with the department during an audit?
- Is the disregarded entity subject to interest or penalties if it doesn’t file Form DER-1 timely?
