To Elect or Not to Elect?
Treasury Regulations provide default rules for the proper tax characterization of both domestic and foreign entities.[i] Generally, a business entity that is not classified as a corporation under certain prescribed rules (referred to as “eligible entities”) can elect their tax characterization for federal tax purposes.[ii]
For example, an eligible entity (domestic or foreign) with two members can generally elect to be characterized as either a corporation or a partnership for federal tax purposes. Conversely, an eligible entity with only one owner can elect to be characterized as either a corporation or a disregarded entity.
Tax Consequences of not Making an Election.