Pass-Through Entity
Also called: pass through business, S corporation, LLC taxation
A pass-through entity pays no entity-level income tax; profits flow to the owners' personal returns. Partnerships, S-corps, LLCs and sole proprietorships work this way, and they are the majority of US businesses. The structure avoids double taxation, and the choice between S-corp and sole proprietorship often hinges on payroll tax, since an S-corp owner can split income between salary and distributions.