Form 8832: What Is It?

Partnerships and Limited Liability Companies (LLCs) can file IRS Form 8832. Businesses file this form if they want to be taxed as different kinds of companies, like a corporation.

Why Is Form 8832 Important?

No business wants to pay too much in taxes.

Business entities are given a default tax classification (i.e. a multi-member LLC is taxed as a partnership unless it changes its tax status). Sometimes businesses can pay thousands of dollars less, just by changing how the business is taxed!

Reasons to Consider Not Using Form 8832:

Form 8832 can only be used by some businesses. Here are a few businesses filing Form 8832 may not be for:

  • Insurance companies

  • State-chartered banks (if FDIC-insured)

  • U.S. or foreign corporations

  • A business owned by a state or by a foreign government

  • Tax-exempt organizations

  • Real Estate Investment Trusts (REITs)

  • Businesses that want to be taxed as S-Corporations

Reasons to Consider Using Form 8832:

Partnerships and LLCs might benefit from filing Form 8832.

Other businesses that may want to consider using the form are:

  • LLCs or partnerships taxed as corporations because they previously filed Form 8832

  • Foreign businesses that are associations taxed as a corporations

Deadline

There is no deadline to file Form 8832. It can be filed anytime during a businesses' lifetime.

If a business wants to change its tax classification, the filing date is important! The change in tax status for the business is effective either:

  • Up to 75 days before filing the form.

  • Up to one year after filing the form.

If no date is entered, the filing date is the effective date.

Some businesses may still be able to benefit from a Form 8832 change outside of these time frames. The instructions for the form give more information about this option.

Examples

  • An LLC with one member does not file Form 8832. The business will continue to be taxed as a disregarded entity.

    • Pro: Filing taxes is simpler for the owner.

    • Con: The LLC may receive better tax treatment as a Corporation.

  • A Partnership or an LLC with at least two members might file Form 8832 to choose Corporate tax status.

    • Pro: Instead of each partner reporting their share of gains and losses, these are reported at the entity level. This may save money on taxes.

    • Con: Individual partners may prefer Partnership tax status.

Common Mistakes

  • Businesses that want to change their tax classification to an S-Corporation do not need to file Form 8832. Instead, they should file Form 2553.

  • When a single-member LLC adds more members, the business will be taxed as a partnership. This is true unless the business files Form 8832 to change the classification.

Frequently Asked Questions

  • How is Form 8832 different from IRS Form 2553?

    Businesses that wish to be taxed as S-Corporations should use Form 2553. Form 8832 is for Partnerships and LLCs that wish to be taxed as a C corporation.

  • If a partnership elects Corporate status with Form 8832, can one Partner still choose to be taxed  like a partnership?

    No. All partners and members must be taxed consistently - the same as the business.

Steps to File Form 8832

1. Use IRS Form 8832

2. Follow the instructions to complete the two-page form (three pages if "late election relief" is desired.) The instructions are part of the form.

3. Every partner or member must sign the form. An authorized representative for the business must also sign.

4. File the completed form with the IRS Service Center for your state. Also, send a copy of Form 8832 with your next business tax return.

5. The IRS will either accept or deny the filing request. They will notify the business within 60 days with the decision.

Next Steps

If you are making a decision on whether or not filing Form 8832 is right for your business or if you need help setting up your LLC, you can post your legal question on UpCounsel's marketplace. Posting your legal question instantly gets you multiple free custom quotes from the top 5% of lawyers to help with your specific legal situation. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience including work with or on behalf of companies like Google, Stripe and Twilio.