Many owners choose to operate their business as a pass-through entity, rather than as a C corporation, to avoid paying an entity level tax on business income.

Question

Quizplus · Accepted Answer

This is true. Pass-through entities, such as sole proprietorships, partnerships, and S corporations, do not pay entity level taxes. Instead, the business income is passed through to the owners and reported on their individual tax returns. This avoids double taxation, as the income is only taxed once at the individual level.

Many Owners Choose to Operate Their Business as a Pass-Through