Owners of a small business often minimize tax costs and maximize cash flow by operating as a passthrough entity.

Question

Quizplus · Accepted Answer

This statement is true. Passthrough entities, such as sole proprietorships, partnerships, and S corporations, do not pay federal income tax at the business level. Instead, the business income is passed through to the owners and taxed on their individual tax returns. This can result in lower tax costs and increased cash flow for the business.

Owners of a Small Business Often Minimize Tax Costs and Maximize