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IRS Form 8832 and UK Corporations

Form 8832 is often cited as a source for entity classification. “According to form 8832, the only UK entity classified as a corporation is a public limited company. “ It is important to read between the lines – default entity classification on form 8832 is not all inclusive.

The instructions to form 8832 also contain interesting definitions which we will outline and explain below.

Foreign default rule

Unless an election is made on Form 8832, a foreign eligible entity is:

1. A partnership if it has two or more members and at least one member does not have limited liability.
2. An association taxable as a corporation if all members have limited liability.
3. Disregarded as an entity separate from its owner if it has a single owner that does not have limited liability.

What is a Foreign Eligible Entity?

https://www.irs.gov/irm/part4/irm_04-061-005.html

According to the IRS, a “foreign eligible entity” is generally defined as “an eligible entity that is not created or organized in the U.S. or under the law of the U.S. or any State.“

Now – to determine the classification, the key determinant is whether the members have limited liability.

Whole Story at TFX.

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