# Pass-Through Entity

*Taxes — Finicade finance glossary*

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.

**Also known as:** pass through business, S corporation, LLC taxation

**Related terms:** [Schedule K-1](https://finicade.com/glossary/schedule-k-1), [Double Taxation](https://finicade.com/glossary/double-taxation), [Corporate Tax Rate](https://finicade.com/glossary/corporate-tax-rate), [Qualified Business Income Deduction](https://finicade.com/glossary/qualified-business-income-deduction), [Self-Employment Tax](https://finicade.com/glossary/self-employment-tax)

Source: https://finicade.com/glossary/pass-through-entity