A tax characteristic where the business entity is not taxed and tax is only paid by the owners of the entity on their personal tax returns. This includes shareholders in an “S” corporation, members in an LLC and partners in a partnership. It is called “pass-through” taxation because the profits of the entity are “passed through” to the owners for the taxes to be paid by them individually. To learn more about pass-through taxation in an S corporation, click here.
Income to the entity is not taxed. Instead the income is "passed through" to the individual shareholders or interest holders. S corporations, Partnerships and LLCs are pass-through taxation entities.
All income and profits are passed through the entity to the owner and this income is only taxed one time. LLCs and S Corporations provide this tax benefit to their owners.
A tax concept that occurs with S-Corporations and LLCs. The gains or losses of the company are passed through to the owners and taxed at the personal level and not at the corporate level.
A taxation situation where the business entity is not taxed and tax is only paid at the shareholder or interest holder level. Note that S corporations and Limited Liability Companies are pass-through taxation entities.
The income to the entity is not taxed at the entity level; however, the entity does complete a tax return. The income or loss as shown on this return is "passed through" the business entity to the individual shareholders or interest holders, and is reported on their individual tax returns. S corporations and LLCs are both pass-through tax entities.
This means that the taxes on the earnings of an LLC are only taxed once, unlike that of a C-corporation.
Rather than tax the income of the entity, taxation is "passed through" to the individual shareholders in S corporations (and LLCs). Income or losses are declared on their individual tax returns.
