HR Glossary / Disregarded Entity

A disregarded entity is a company that is not separate from its sole owner for federal tax purposes, meaning that the company taxes are paid as part of the federal income tax return of the owner.

What Are the Advantages of a Disregarded Entity?

  • Simpler tax filing;
  • Status only valid at the federal level, allowing the company to keep its liability advantages at the provincial or state level;
  • Not subject to double taxation.

Due to their complexity, laws regarding disregarded entities should always be discussed with qualified professionals.

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