What is Disregarded Entity?
Definition A disregarded entity is a business with a single owner that the IRS ignores for federal income tax purposes, so its activity is reported directly on the owner's return. The most common example is a single-member LLC that has not elected corporate taxation. Even though it is invisible for income tax, it can still be treated as separate for liability, payroll, and certain excise taxes.
Understanding when an entity is disregarded prevents filing errors, such as expecting a separate return when the income actually belongs on the owner's Form 1040.