Form 8832 is an IRS form used by businesses to change their tax classification, which can affect how they are taxed and regulated by the government.
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Last Updated: February 25, 2026
Eligible entities use Form 8832 to elect their tax classification for federal tax purposes. In effect, a business can form as one entity type but pay taxes as a different entity type. This guide explores the Form 8832 definition, looks at examples, explains some benefits, and reviews the requirements for filing.
The IRS’s Form 8832, Entity Classification Election, is what certain businesses use to tell the IRS how to classify them for federal tax purposes. When a business files Form 8832, it’s making a tax election and choosing whether it wants to be taxed as a C corporation, a partnership, or a sole proprietorship. Entities eligible to file Form 8832 include U.S.-based partnerships, limited liability companies (LLCs), and qualifying foreign entities.
Businesses that don’t file Form 8832 are stuck with the default classification for their entity type.
Examples are helpful in understanding the definition of Form 8832. Suppose that a U.S. company is organized as a limited liability company (LLC).
By default, the IRS classifies single-member LLCs as sole proprietorships and multi-member LLCs as partnerships. Both entity types are subject to pass-through taxation — meaning that all business income and losses pass through to the owners. The entity itself doesn’t pay federal income taxes. Rather, the business owner reports the profits and losses on their personal tax return and pays income tax based on their individual tax rate.
For some businesses, this tax treatment isn’t advantageous (more about this below), so they change how the LLC is taxed. By completing and filing Form 8832, the LLC can make an election to classify itself as a C corporation. The IRS will then tax the LLC as a C corporation, where income is taxed twice — once at the corporate level (when the company makes a profit) and again at the shareholder level (when the company issues dividends). This is known as double taxation.
Sticking with LLCs, there are benefits to electing C corporation tax treatment. As discussed above, LLC owners can elect to keep the default pass-through tax status of an LLC. If they do this, they’d report all business income on their personal tax return. However, in some cases, including this extra income on their personal tax return pushes the business owner into a higher tax bracket. Ultimately, this can mean that they pay more in taxes than if the income were subject to double taxation. So, using Form 8823, they can make an election to reclassify the LLC as a C corporation. This keeps the company’s income separate from the owner’s income.
Deciding which taxation method is best for a company is an individual decision that must take the company’s whole financial picture into account. It’s prudent for entrepreneurs to consult with a tax professional before deciding on a tax structure.
To complete Form 8832, a filer needs basic information about the business, including the following:
A business owner can file Form 8832 at any time while the business exists, and they can choose the effective date. The only limitation is that the newly elected tax status can only go into effect up to 75 days before making the election, and no later than 12 months after making the election.
Form 8832 is the form that eligible entities use to reclassify their business for tax purposes. Reclassifying a tax status impacts how the business pays taxes and how much it owes. It’s helpful for entrepreneurs to fully understand the tax classification for an LLC or their desired business structure.
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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional.
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