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A flow-through entity (FTE) is a legal entity where income "flows through" to investors or owners; that is, the income of the entity is treated as the income of the investors or owners. Flow-through entities are also known as pass-through entities or fiscally-transparent entities.
Pass-through income avoids taxation at the business entity level. Instead, the profits are distributed to business owners, shareholders, and partners as ordinary income.
The primary characteristic an LLC shares with a corporation is limited liability, and the primary characteristic it shares with a partnership is the availability of pass-through income taxation. As a business entity, an LLC is often more flexible than a corporation and may be well-suited for companies with a single owner. [5]
Pass through device (automotive) Passthrough (architecture), an opening between the kitchen and the dining room; Pass-through (economics), offsetting a change in costs by changing prices Exchange-rate pass-through; Pass-through entity, a term in the US tax law; Pass-through certificate, a financial instrument accessing the related Pass-through ...
Both of these elections are considered pass-through taxation because the profits/losses and thus taxes of a business are directly passed on to the members via their individual tax returns. When taxed as a C-Corporation, the entity will pay corporate taxes before profit is distributed to members who will also be required to pay tax on their gains.
In the United States, a master limited partnership (MLP) or publicly traded partnership (PTP) is a publicly traded entity taxed as a partnership.It combines the tax benefits of a partnership with the liquidity of publicly traded securities.
The entity concept governs the characterization "income, gain, losses and deductions from the partnership operations, are initially determined at entity level. These items are then passed through to the partners through their distributive shares." [2]
The term "pass through" refers not to assets distributed by the corporation to the shareholder, but instead to the portion of the corporation's income, losses, deductions or credits that are reported to the shareholder on Schedule K-1 and are shown by the shareholder on his or her own income tax return. A distribution to a shareholder that is ...