Pass-through entities offer a distinct tax advantage over traditional C-corporations. They are not required to pay federal taxes at the entity level. Instead, each owner must report their share of the business profits, losses, and other tax items on their individual tax returns. This prevents double taxation, a common concern for business owners, where income is taxed at both the corporate and individual levels.
While pass-through entities escape federal taxation, it’s important to note that some states impose taxes on pass-through entities doing business within their jurisdiction. For instance, California has an annual franchise tax with a minimum payment of $800. Additional taxes and fees may also apply based on the company’s income or activities.
For a deeper understanding of what “doing business” in California means, check out our prior newsletter, Understanding the Tax Implication of Conducting Business in California.
Understanding Your Tax Obligations as a Pass-Through Entity
Keep Reading
Things to Keep in Mind When Hiring Household Employees
When hiring household employees, being aware of your responsibilities as an employer is important. Here are some essential factors to consider: Who is considered a household employee? A household employee is someone you hire to work in or around your home and have control over their tasks and how they are carried out. This includes full-time […]
Methods to Save on Taxes When Selling Rental Property
Thinking of selling your rental property or converting it into your home to save on taxes? With the right approach, you can reduce or defer capital gains taxes and make the most of your investment. Here’s how strategic tax planning can help: 1. Reduce Taxes by Converting Your Rental Property to Your Primary Residence […]
Tax Relief for Los Angeles County Residents: Extended Deadlines
The IRS and the State of California have extended the deadline for Los Angeles County taxpayers. County residents have until October 15, 2025, to fulfill their tax filing and payment obligations, providing significant relief during these challenging times. Who Qualifies for Relief? Taxpayers with a recorded address in Los Angeles County automatically qualify for this […]
Join our newsletter
Check out of some of the topics we’ve written about! Hope they help, or perhaps even spark a conversation. If you want to regularly receive these kind of updates, please sign up for our newsletter.