Check-the-box election
IRS election for eligible entities to choose their federal tax classification.
Definition
The check-the-box election under Treasury Regulation § 301.7701-3 lets eligible entities (LLCs, certain foreign entities) elect their federal tax classification. Default for single-member LLC: disregarded entity. Default for multi-member LLC: partnership. Election to be taxed as corporation: Form 8832.
Context
Single-member Delaware LLC owned by a non-resident is a disregarded entity by default, taxed as if the income flows directly to the foreign owner.
Example
A Delaware LLC elects C-corp tax treatment by filing Form 8832. The LLC files Form 1120 as a US corporation and pays 21% federal corporate tax.
Common pitfalls
- Once elected, the entity generally cannot change back for 5 years.
- Tax planning implications can be substantial.