The election is made by filing Form 8832, Entity Classification Election, with the tax return in the first year for which the election is made. If the entity is classified as a corporation under Regulations, the entity must file as a corporation. Limited Liability A corporation formed under state law will generally shield owners from liability for the corporation s actions. A corporation stockholder s risk of loss is generally limited to the amount invested in the corporation stock owned. This is in contrast to sole proprietors or general partners in partnerships who are personally liable for the debts of the business.
State laws determine limited liability status for an entity.
Failure to observe corporate formalities. Needed to accomplish substantial justice. Incorporating a business should never be considered a substitute for liability insurance.