Entities
Disregarded entity
A disregarded entity is a business the IRS ignores for federal income tax purposes, treating its income as belonging directly to its owner. A single-member LLC is a disregarded entity by default. The company still exists legally and still provides liability protection.
In plain terms: The company is real for liability but invisible for income tax — the profit is treated as yours.
Why it matters
This is the default treatment for single-member LLCs and the source of endless confusion, because 'disregarded' sounds like 'exempt'. It is not. A foreign-owned disregarded LLC has one of the heaviest filing obligations of any small US entity: Form 5472 with a pro forma Form 1120, every year, penalty $25,000.
Common misunderstanding
Reading 'disregarded' as 'no filing required'. It refers only to how income is attributed, not to whether returns are due.
Read the full guideInternational foundersRelated terms
Source: IRS — Single member limited liability companies. This is a definition, not tax or legal advice — verify against the primary source before acting.