Registering a disregarded entity for tax purposes

Do you need to register a disregarded entity in Philadelphia? You can either do it online or over the phone. First, let's remind ourselves what disregarded entities are.

Disregarded entities are single-member limited liability companies (LLCs) that the Internal Revenue Service (IRS) ignores for income tax purposes. This business type doesn't file a separate tax return. Instead, its income taxes are reported to the IRS through its owner's personal tax return, which is filed under the owner's Social Security Number (SSN) or federal employer identification number (EIN), depending on the owner's situation.

Philadelphia follows the same federal rule. If your business is considered "disregarded" for federal income tax purposes, it is also considered "disregarded" for Philadelphia business income tax purposes. For guidance on how certain federal tax provisions are treated for Philadelphia business and personal tax purposes, please visit our Guidance on federal tax laws webpage.

Philadelphia considers a disregarded entity's owner as its "parent company." A "parent company" can be an individual, a corporation, a partnership, or another limited liability company (LLC). As per City tax rules, this owner or parent company must file the Business Income and Receipts Tax (BIRT) on behalf of the disregarded entity. The parent company may also need to register for a Net Profits Tax (NPT) account. Similarly, the IRS requires the owner to report the disregarded entity's income and expenses on their individual 1040, using Schedule C.

Ready to register your entity?

You can easily register your disregarded entity on the Philadelphia Tax Center if your "parent company" is already registered in our system.

The online registration involves three steps. Below, we discuss each step briefly to get you started. We've compiled this step-by-step guide on how to register your entity online. Check out the guide for full details on how to register your entity. Better yet, watch this live demo!

Step 1

Individuals or sole proprietors must already have a Philadelphia Business Income and Receipts Tax (BIRT) account under their name, social security number, or federal EIN. This is the first step to registering your disregarded entity.

If you don't already have a BIRT account, you'll need to create one. This is the only way to register a disregarded entity. You'll need to register as a "New taxpayer" on the Philadelphia Tax Center. Here's a step-by-step guide to help you. You will find instructions on pages 3 to 20 for registering as a "New taxpayer."

Step 2

Once you've created your BIRT account, you'll need to register your entity. Follow these steps:

1. Visit tax-services.phila.gov and select "Register a new taxpayer".
2. Choose "no" under "Registration type" and select "Next."
3. When you get to the "Entity type" screen, select "I know my entity classification," then choose "Disregarded Entity."
4. On the "Entity sub-classification selection" screen, pick "individual" if you're registering as a single-member disregarded entity. If your entity is a limited liability company, you must choose "Limited liability company" on this screen.

Complete your entity registration by following the on-screen prompts. Pages 21 to 39 of the step-by-step guide walk you through this process as well.

Step 3

The last step is to link your disregarded entity and business accounts. This will give you access to both accounts under one username. To do this, you'll need to sign in to your Philadelphia Tax Center profile and follow the registration steps for a third-party access, but it's actually for your other accounts. You can find step-by-step instructions on how to do this on pages 40-50 of the guide.

Have questions or need help registering your entity? We're happy to help! Give us a call at (215) 686-6600.