Refers to how individual owners of a business pay taxes on income derived from that business on their personal income tax returns. Pass through taxation applies to sole proprietorships, partnerships, and S-Corporations. This is opposed to traditional, or C-Corporations, where the company itself pays corporate taxes on income the corporation derives.
Definition from Nolo’s Plain-English Law Dictionary
The taxation method applied to sole proprietorships, partnerships, and limited liability companies, where the owners pay taxes on all business profits on their individual tax returns (the business income "passes through" the business to the owners' tax returns). In contrast, a corporation, or a business that elects corporate-style taxation, is taxed directly on all business profits.
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:21 pm