What does pass through taxation mean? and U.S. Customs and Border Protection Acting Commissioner David V. Aguilar and European Union Taxation and Customs Union Directorate Director-General Heinz Zourek sign the Mutual Recognition Decision.

What does pass through taxation mean?

I'm thinking of incorporatin and I'm trying to find out whether an S Corp or LLC would work best for me. But I'm not sure what pass-through taxation means.


Taxation best answer:

Answer by sumbumblebee
Pass-through taxation means that the business entity itself doesn't pay any taxes. Instead, all taxable income is passed through to the owners/members (depending on which type of entity you start) on a form called a K-1. You then take this form, just like you would a W-2 or a 1099 and input the information on your individual taxes.

In this way, these types of entities aren't taxed twice like a regular C corporation is. There, the entity itself is taxed, as are the shareholders when they receive income in the form of dividends.

Taxation

U.S. Customs and Border Protection Acting Commissioner David V. Aguilar and European Union Taxation and Customs Union Directorate Director-General Heinz Zourek sign the Mutual Recognition Decision.


Image by CBP Photography
050412: Washington, D.C. - U.S. Customs and Border Protection Acting Commissioner David V. Aguilar and European Union Taxation and Customs Union Directorate Director-General Heinz Zourek sign the Mutual Recognition Decision between CBP's Customs-Trade Partnership Against Terrorism program and the EU's Authorized Economic Operator Program.
Photographer: James Tourtellotte

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