Your holding company, a SMLLC, is a disregarded entity, and as such, will be reported directly on your tax return. If you want to set up a C corporation, you can do that, but using your SMLLC will be treated as if you owned it directly; sole shareholder.

What legal entity is a holding company?

A holding company is a parent business entity—usually a corporation or LLC—that doesn’t manufacture anything, sell any products or services, or conduct any other business operations. Its purpose, as the name implies, is to hold the controlling stock or membership interests in other companies.

Is it bad to be a disregarded entity?

There isn’t anything wrong with being a disregarded entity and being taxed like a sole proprietor when you own an SMLLC. But, if you decide that you’d rather be taxed differently, you have some options: You can choose to be taxed as an S Corp or a C Corp.

Can a disregarded entity be a sole proprietorship?

Details on the Disregarded Entity LLCs are registered with a state as a legal entity, but the IRS doesn’t recognize this business type for tax purposes. It regards LLCs as partnerships if the business has more than one member (owner), and as a sole proprietor if the LLC has only one member. 2 

What does disregarded entity mean for a LLC?

Disregarded Entity is a term used by the IRS for Single-Member LLCs, meaning that the LLC is “ignored” for tax purposes. The IRS simply treats the LLC and its owner as the same person.

Can a single member LLC be disregarded as an association?

The Code says, “an eligible entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner.”. The only business type that fits all the qualifications to be a disregarded entity is a single-member LLC. (SMLLC).

How is oranges LLC treated as a disregarded entity?

The 1st Member is Bob and he owns 50% of Oranges LLC. The 2nd Member is Apples LLC and Apples LLC owns the other 50% of Oranges LLC. Because Apples LLC is treated as a Disregarded Entity, the IRS sees both of the owners of Oranges LLC as being the same person and therefore, Oranges LLC is treated as a Disregarded Entity instead of a Partnership.