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What is a disregarded entity? US LLC tax definition

Disregarded entity explained: why a single-member US LLC is ignored for US income tax, what that means for a foreign owner, and the exceptions.

Amel Ouchene, IRS PTIN holder and CPA Candidate. October 19, 2026, 2 min read

A disregarded entity is a business entity with a single owner that is "disregarded as an entity separate from its owner" for US federal income tax. The LLC still exists legally (it signs contracts, has a bank account, limits your liability), but the IRS looks through it to you.

The default rule

According to the Instructions for Form 8832, unless an election is made, a domestic eligible entity is "a partnership if it has two or more members" and "disregarded as an entity separate from its owner if it has a single owner". A US single-member LLC is therefore disregarded by default. Form 8832 lets it choose to be taxed as a corporation instead.

What it means for a founder abroad

  • The LLC pays no US corporate income tax.
  • Whether you owe US personal tax depends on your own situation: effectively connected income leads to a Form 1040-NR.
  • Even so, a disregarded LLC owned by a foreign person is treated as a corporation for one purpose: it files Form 5472.

Your country of residence does not have to follow the US view. France and Switzerland, for example, apply their own rules to classify an LLC: see our guides for French residents and Swiss residents.

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Go further

20 min read

1040-NR Foreign LLC Owner: Do You Need to File?

Wondering if you must file Form 1040-NR as a foreign LLC owner? Learn how ECI, US trade or business status, and tax treaties affect your return.

Read the guide24 min read

Form 5472 Line-by-Line Guide for Foreign-Owned US LLCs

Learn how to fill out Form 5472 and pro forma Form 1120 for your foreign-owned single-member US LLC. Line-by-line guide, worked example, fax and mailing rules.

Read the guide

This article is general information about US tax rules for foreign-owned LLCs, not advice for your specific situation. Rules change; check the date above and ask before you file.