Form 8832 — Entity Classification Election

Form 8832 Overview

Form 8832 is used to elect the federal tax classification of an eligible entity. Under the check-the-box regulations (Treas. Reg. §301.7701-3), eligible entities can elect to be classified as a corporation, partnership, or disregarded entity for U.S. federal tax purposes. The election is made by filing Form 8832 with the IRS.

The most common uses of Form 8832: (1) electing C-Corp status for a domestic LLC (to enable QSBS qualification or VC investment); (2) electing disregarded entity status for a foreign subsidiary (to simplify U.S. tax reporting); and (3) electing partnership status for a foreign entity that would otherwise be classified as a corporation under the default rules.

Default Classification Rules

Under the check-the-box regulations, eligible entities are classified under the following default rules if no election is made:

Per se corporations (entities that cannot elect a different classification) include: entities organized under the laws of a country that requires all members to have limited liability, and entities listed in Treas. Reg. §301.7701-2(b)(8) (e.g., German AG, French SA, UK PLC). Practitioners must verify whether a foreign entity is a per se corporation before advising on entity classification.

Making the Election

Form 8832 is filed with the IRS service center where the entity files its tax return. The election is effective on the date specified on the form, which can be up to 75 days before the date the form is filed or up to 12 months after the date the form is filed. If no effective date is specified, the election is effective on the date the form is filed.

An entity that has made an election cannot change its classification again for 60 months (5 years) after the effective date of the election, unless the IRS consents to an earlier change. This waiting period is a significant constraint for entities that change their business plans and need to change their tax classification.

Late Election Relief

Rev. Proc. 2009-41 provides relief for entities that failed to timely file Form 8832. Under the revenue procedure, an entity can file a late Form 8832 within 3 years and 75 days of the intended effective date of the election if: (1) the entity failed to obtain its intended classification solely because it failed to file Form 8832 timely; (2) the entity has not filed a tax return for the first year in which the election was intended to be effective; and (3) the entity is not requesting relief for any other purpose.

Practitioners should advise clients who missed the Form 8832 filing deadline to consider late election relief under Rev. Proc. 2009-41. The relief is available for both domestic and foreign entities.

Frequently Asked Questions