A disregarded entity is a business entity with one owner that the IRS ignores for income tax purposes: its activity is reported directly on the owner's return as if the entity did not exist. The most common example is a single-member LLC that has not elected corporate treatment. Its income lands on the owner's Schedule C (or Schedule E for rentals), and a wholly owned LLC under a corporation or partnership simply folds into its parent's return. Disregarded status applies only to income tax. The entity is still respected for employment taxes, certain excise taxes, and state law liability protection, and it still needs its own EIN if it has employees. A disregarded entity becomes a partnership the moment it admits a second owner, and can elect corporate status at any time.
Disregarded Entity
Primary authority: Treas. Reg. §301.7701-3(b)(1)(ii)
The authority behind it
Treas. Reg. §301.7701-3(b)(1)(ii)
Every entry in this glossary cites the statute, regulation, or IRS guidance behind it.
Worked example
A landlord holds a rental property in a single-member LLC for liability protection. The LLC files no federal return; the rental income and depreciation flow straight onto Schedule E of the owner's Form 1040.
Want the books, the quarterlies, and the filing behind terms like this handled for you?
Talk to UsFree 30-minute review. No pitch deck.
What you get with Amadae
One flat monthly price. Real accountants who know how creators get paid.
- Every payout and 1099 categorized as it lands
- Business costs tracked as write-offs monthly
- Quarterly estimates calculated and set aside before each deadline
- Your return filed by a real accountant, S-corp math included
Free 30-minute review. Cancel any time.
Plans from
$249/mo
If you make $40K - $69K. Flat, no hourly bills.
- Monthly profit and loss reports
Keep reading
Related terms
Limited Liability Company (LLC)
An LLC is a state-law entity that gives its owners a liability shield while leaving federal tax treatment up to an...
Read the definition →
Sole Proprietorship
A sole proprietorship is the default tax treatment for one person doing business without an entity, or through a...
Read the definition →
Partnership
A partnership is a business with two or more owners that is taxed under Subchapter K of the Internal Revenue Code.
Read the definition →
Stop looking terms up one at a time.
Books, estimates, and filing for creators. Flat monthly price.