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What is a passthrough entity?

Passthrough entities, which are also known as flow through entities, are entities that file informational tax returns but will not be taxed at the entity level. This means that instead of the business (or entity) paying tax at the business level, the income will flow through to the taxpayer’s individual tax return and will be taxed at individual tax rates.

Flow through entities will be presented to the individual taxpayer in the form of a K-1. K-1’s will be reported and attached to the individual’s tax return.

The pass-through entities to be familiar with consist of partnerships, S-corporations (S-Corp), and a limited liability company (LLC).


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