Entity Classification Election: A Complete Guide to Form 8832

By default, the IRS classifies a single-member LLC as a "disregarded entity" and a multi-member LLC as a partnership. Form 8832 lets you change that classification.

Why elect corporate taxation?

The most common reason international founders file Form 8832 is to elect C-Corporation taxation for their LLC. This is often required when:

• •You want to raise venture capital (investors prefer C-Corps)
• •You want to issue stock options to employees
• •You want to retain earnings in the business at the flat 21% corporate rate
• •Your tax advisor recommends it based on your specific situation

When to file

Form 8832 can be filed:

• •Before your LLC starts operating (initial classification)
• •After formation, to change your existing classification

Important: The effective date of the election can be up to 75 days before the form is filed. So if you formed your LLC on January 1 and file Form 8832 on March 1, you can make the election effective as of January 1.

Key fields explained

Line 1 — Type of election. Choose "initial classification" if you're electing before your first tax return, or "change in current classification" if you're switching.

Line 2 — Form of election. Choose the classification you want. For most foreign-owned LLCs wanting corporate treatment, select: "A domestic eligible entity electing to be classified as an association taxable as a corporation."

Line 3 — Effective date. Cannot be more than 75 days before filing or more than 12 months after filing.

Line 4 — Authorized person. Must be signed by an authorized officer, member, or manager of the entity.

After filing

Once approved, the IRS will send a confirmation letter. Your LLC will be treated as a corporation for all federal tax purposes from the effective date. You'll file Form 1120 instead of reporting on your personal return.

Can you reverse it?

Yes, but not easily. If you elect corporate taxation and later want to go back to disregarded entity or partnership treatment, you generally must wait 60 months before making another election.