What is a flow-through entity, and what effect does this designation have on how business entities and their owners are taxed?

Business Dec 09, 2020

Expert Solution

Flow-through entities may be defined as entities whose income is not taxed at the entity level but the income passes on to the owners in the ratio of their ownership interest and is taxed in their hands. So if a person is the owner of a flow-through entity he will be taxed for the entity's income proportionately. E.g. General partnership, limited partnership, and limited liability companies.

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