Final answer:
The statement is false; a disregarded entity is respected for legal purposes but disregarded for federal tax purposes, meaning it's separate legally but not recognized as separate by the IRS for taxation.
Step-by-step explanation:
The statement provided in the question is false. A disregarded entity actually exists for legal purposes, but is disregarded for tax purposes. Essentially, this means that the entity is treated as a separate entity from its owner for legal matters (like contracts and liabilities), but all of its income, losses, deductions, and credits are reported on the owner's personal tax return as if the entity does not exist for federal tax purposes. This treatment simplifies the tax reporting requirements but does not affect the entity's legal obligations or protections.