Your tax classification tells the IRS how to tax your business income. It's separate from your business structure, which is the legal business entity registered with your state.

Important: Your business structure and tax classification can be different. For example, an LLC can choose to be taxed as a sole proprietorship, partnership, S Corp, or C Corp.

Common tax classifications by business structure:

Sole proprietors

• Default tax classification: sole proprietorship

• Tax filing: Using a Schedule C with your personal return 

Single-member LLCs

• Default tax classification: Disregarded entity (i.e. taxed as sole proprietorship)

• You can elect to be taxed as S Corp or C Corp by filing Form 2553 or Form 8832 with the IRS.

Multi-member LLCs

• Default tax classification: Partnership

• You can elect to be taxed as S Corp or C Corp by filing Form 2553 or Form 8832 with the IRS.

Corporations

• Default tax classification: C Corporation

• You can elect S Corporation status by filing Form 2553 with the IRS.
  

How to check your tax classification in Found

On desktop:

1. Go to Taxes tab

2. Click on the arrow next to Tax profile 

3. Select Tax classification to view or make changes

On mobile:

1. Tap the bar chart icon in top right corner

2. Tap Tax profile

3. Tap Tax classification to view or make changes

Important: Changing your tax classification in Found updates how we track and report your finances, but it does not file anything with the IRS. To officially change your tax classification with the IRS, you need to file the appropriate form (i.e. Form 2553 for S Corp election or Form 8832 for other elections).

Frequently Asked Questions

How do I know what my tax classification is?

If you're not sure what your current tax classification is:

• Check your last tax return - Look at which forms you filed (i.e. Schedule C, Form1065, Form 1120-S, or Form 1120)

• Check your IRS records - If you filed Form 2553 or Form 8832, you elected a specific classification.

• Check with your accountant - They can tell you how you're currently classified.

When should I change my tax classification?

Common reasons to change your tax classification:

• You elected S Corp status with the IRS to save on self-employment taxes

• You converted from a sole proprietorship to an LLC

• Your business structure changed (e.g., you added a partner to become a multi-member LLC)

Do I need to file anything with the IRS?

Yes. To officially change your tax classification, you must file the appropriate form with the IRS:

• Form 2553 - To elect S Corporation status

• Form 8832 - To elect C Corporation or change from C Corp to another classification

Once the IRS approves your election, update your tax classification in Found to match.

Need help? If you're unsure about your tax classification or need guidance on changing it, reach out to us at help@found.com or through the Found app. For tax advice, we recommend consulting with a tax professional.