A business whose income is taxed on the owners' returns rather than at the entity level: partnerships, S corporations, and most LLCs.
Pass-through income is taxed to owners whether or not it is distributed, which is why owners of profitable businesses can owe tax on cash still sitting in the company. Pass-through owners may also qualify for the qualified business income deduction and are subject to basis and at-risk limits on losses.
By default yes: a single-member LLC is disregarded and reports on Schedule C, and a multi-member LLC is a partnership. An LLC can elect to be taxed as an S or C corporation instead.
Last reviewed September 10, 2026. Tax rules change; confirm current law before acting.
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