A pass-through entity's primary characteristic is that income escapes taxation at the entity level and passes through to be taxed at the ownership level.

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A pass-through entity, such as a partnership or S corporation, does not pay taxes on its income at the entity level. Instead, the income is "passed through" to the owners, who report it on their individual tax returns and pay taxes on it at their individual tax rates.

A Pass-Through Entity's Primary Characteristic Is That Income Escapes Taxation