Form 8832
Definition
Form 8832 (Entity Classification Election) is an IRS form used by eligible entities—such as LLCs—to choose how they will be classified for federal tax purposes. The most common use of Form 8832 is by an LLC electing to be taxed as a traditional C-Corporation.
Why it matters
The IRS applies "default" tax rules to LLCs (a single-member LLC defaults to a disregarded entity, and a multi-member LLC defaults to a partnership). If you want a tax status other than your default, you must tell the IRS. If you want to be taxed as an S-Corp, you use Form 2553. If you want to be taxed as a C-Corp (or if you are a foreign entity requesting a specific US classification), you use Form 8832.
Example
A group of founders create an LLC but decide they want to reinvest 100% of the profits back into growing the business. Instead of having those profits pass through to their personal tax returns (where they might face a 37% tax bracket), they file Form 8832 to elect C-Corp status. The LLC now pays a flat 21% corporate tax rate on its retained earnings.