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.
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What is an LLC?
“LLC” is an acronym for limited liability company. An LLC is a type of passthrough entity, meaning the owners individual pay tax and not the business itself. An LLC is a business structure allowed by state statute in which owners (referred to as members) of the entity are not personally liable for the company’s debts […]
What is a partnership?
A partnership is a type of passthrough entity, meaning the owners individual pay tax and not the business itself. Essentially, any profits or losses generated by the partnership “passthrough” to its partners. The partners then report the income on their individual tax return. The partnership is required to file a form 1065 with the IRS […]