IRS Form 8832 (Entity Classification Election)
The IRS form used to elect a different federal tax classification for an LLC. Common election: changing default classification to C-Corp.
Definition
Form 8832 is the IRS's 'check-the-box' election form. An LLC's default classification (disregarded entity for single-member, partnership for multi-member) can be changed by filing Form 8832 to elect C-Corp taxation. Once elected, the change has timing implications (effective date) and cannot be reversed for 60 months without IRS consent.
Context
Most non-resident bootstrap founders keep the default disregarded-entity or partnership treatment. C-Corp election via Form 8832 is sometimes used when a founder plans to take on US-resident co-owners, wants retained-earnings tax planning, or is preparing for VC fundraising (though a separate Delaware-C-Corp formation is usually cleaner for VC).
Example
A Delaware LLC originally formed as single-member disregarded entity adds a US-resident co-founder. The members elect C-Corp taxation via Form 8832 because the new co-founder's income tax planning benefits from corporate-level tax versus pass-through. The LLC now files Form 1120 instead of being treated as the owners' personal income.
Common pitfalls
- Once elected, C-Corp treatment is locked in for 60 months without IRS consent for revocation.
- Form 8832 effective date can be retroactive up to 75 days; missed timing creates a partial-year complication.
- C-Corp election triggers entity-level federal tax (21%) plus dividend tax at distribution.