Do state business entity rules follow federal tax rules?

Keep in mind the difference between state business law and state tax law. The tax status you choose for your entity under the federal check-the-box system doesn't make it that entity for state business law purposes. So, for example, choosing corporate tax treatment for a partnership won't bring corporate limited liability.

There is a trend for states to treat the entity chosen under federal check-the-box as the entity recognized for state tax purposes, but this is optional with the state.

State law may accept pass-through status for an entity (such as an S-corp or an LLC) and still impose a tax of some kind on the entity.

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