Damon Van Fleet explains how pass-through entities work: a business covers operating expenses and owner salary, then any remaining income passes directly to the owner's personal tax return instead of being taxed at the business level.
I'm Damon Van Fleet, owner of PayLessTaxes.com and the PLT Firm. And in 60 seconds or less, what is pass-through? What is pass-through entities? Basically what it means is you have a business and the income that's in that business gets essentially passed down and through the business. So the gross income comes into the business, it basically pays the expenses, and And then it also pays the wages and potentially in salary of the business owner, but it also can pay owner's distributions to the owner. And then all of that income, those two kinds of income actually pass through and come down to your personal tax return, essentially. So that is what a pass-through entity is or does. And that's what pass-through means when you hear that in different business articles that you might be reading as a business owner.
