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
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