Pass-Through Taxation: What You Need to Know

Most US businesses have a pass-through taxation structure: they are not subject to corporate tax. Instead, they have their income “pass through” to their owners to be taxed on their individual income tax returns. 

Pass-through businesses have simpler filing and a lower tax rate than C corporations because they avoid double taxation. Pass-through business owners must pay self-employment taxes, however, in addition to state and local taxes. C corporations are eligible for some tax breaks that pass-throughs do not qualify for, although pass-through entities may qualify for a special deduction under a tax law that took effect in 2018. 

Taxation is not the only factor to consider when selecting a business structure. Not all pass-through businesses enjoy limited liability protection, and unincorporated businesses may face limitations with growth and financing. 

Types of Pass-Through Business Entities 

About the S Corporation Tax Election

Disadvantages of Pass-Through Status

Which Structure Is Right for Your Business? 

Choosing the proper business entity structure involves balancing several factors. Learn More and read the full post here

The Nosy Lawyer™
(248) 562-6423