what is the difference between a disregarded entity and a corporation
So, basically, any SMLLC that is not taxed as a corporation is a disregarded entity for tax purposes. That is, the SMLLC is taxed as a sole proprietor. But here's where the confusion comes in: A sole proprietor is NOT a disregarded entity because the company is not separate from the owner.â.
However, you can choose to have your LLC taxed as a corporation by filing a form with the IRS. Corporations are taxed as either S corporations or C corporations. An S corporation is a pass-through entity that does not pay taxes at the corporate level.