Check The Box Election Explanation

A corporation which is not an eligible entity will often convert to a limited liability company llc in order to check the box and be treated as disregarded.

Check the box election explanation. A grandfather clause allowed entities in existence on may 8 1996 to continue using their previous classification even if they would no longer be eligible to elect that classification under the new rules. However it should be treated as a corporation for federal tax purposes. This election commonly known as the check the box election is treated as a deemed liquidation of the entity.

The corporations include the firms started under. The regulations permit qualified entities that are not automatically treated as corporate to elect check the box. You simply check the appropriate box specify the date that the election is to be effective sign and file the form.

As is the case with most elections the check the box election must be made in a timely manner. Key points about check the box elections a business entity that is not a per se corporation referred to as an eligible entity may elect to be classified for us federal tax purposes as a. This election is made by filing form 8832 entity classification election with the irs.

The check the box regulations treasury decision 8697 were adopted in 1996 in order to simplify the issue of entity classification. Form 8832 entity classification election. For federal tax purposes the entities are automatically treated as corporations.