Pass Through Taxation

Pass-through taxation means that an LLC’s profits and losses are not taxed at the company level. Instead, they “pass through” to the owners’ personal tax returns. This prevents the double taxation that corporations face. By default, single-member LLCs are taxed as sole proprietorships and multi-member LLCs as partnerships, but LLCs can also elect S-Corporation status for potential tax savings. Pass-through taxation is one of the main reasons entrepreneurs choose LLCs. It simplifies taxes while maintaining liability protection.