Flow-Through Entity

What is a 'Flow-Through Entity'

A flow-through entity is a legal business entity that passes income on to the owners and/or investors. Flow-through entities are a common device used to limit taxation by avoiding double taxation. Only the investors/owners are taxed on revenues, not the entity itself.

BREAKING DOWN 'Flow-Through Entity'

Also known as pass-through entities, flow-through entities are commonly grouped into limited, general and limited liability partnerships, along with income trusts and limited liability companies. Although flow-throughs are considered non-entities for tax purposes, U.S. law still requires flow-through entities to file an annual K-1 statement.

RELATED TERMS
  1. Financing Entity

    The party in a financing arrangement that provides money, property, ...
  2. Accounting Entity

    A clearly defined economics unit that is accounted for separately. ...
  3. Actual Owner

    A person or entity that receives the benefit of ownership. Being ...
  4. Reference Entity

    One of the underlying parties involved in a credit derivative ...
  5. Interlocking Shareholdings

    A method of creating a unified business group by exchanging shares. ...
  6. Bond Bank

    A state-level entity that provides that state's smaller public ...
Related Articles
  1. Investing

    How Special Purpose Entities Help Fight Risk

    A special purpose entity, sometimes called a special purpose vehicle, is a legal entity created for one very limited, particular task. Typically, SPEs are subsidiaries of a larger corporation.
  2. Economics

    What is a Tax Liability?

    Tax liability is the amount of money a person or entity owes to the government as the result of a taxable event.
  3. Economics

    Limited Liability Partnership (LLP): The Basics

    LLPs are a flexible legal and tax entity that allows partners to benefit from economies of scale by working together while also reducing their liability for the actions of other partners.
  4. Mutual Funds & ETFs

    How Private Equity and Hedge Funds are Taxed

    Private equity and hedge funds offer an appealing tax structure for those who can afford to invest in them. Here's why.
  5. Entrepreneurship

    Which Type of Organization Is Best For Your Business?

    Learn the differences between the types of business organizations so you can determine how to best structure your business for tax and liability limitations.
  6. Investing

    Off-Balance-Sheet Entities: An Introduction

    The theory and practice of these entities varies greatly. Investors need to learn what they're getting into.
  7. Taxes

    Understanding Income Tax

    Income tax is a levy many governments place on revenue of entities within their jurisdiction.
  8. Options & Futures

    Asset Protection For The Business Owner

    Could incorporating your business help protect it? Find out here.
  9. Taxes

    Understanding Taxation

    Taxation refers to the act of a taxing authority levying tax, typically a government – federal, state, county or city – collecting revenue from citizens.
  10. Economics

    Basic Concept Of Absolute Advantage

    Absolute advantage is the ability of an individual, country or company to produce a good or service at a lower cost than any competitor. An entity with an absolute advantage requires fewer inputs ...
RELATED FAQS
  1. What are some examples of how corporations manage short-term investments?

    Learn how a business owner can protect against significant liability by forming a corporate entity structure, and understand ... Read Answer >>
  2. How can a company or entity maintain an absolute advantage?

    Learn how a company or entity is able to maintain a absolute advantage. Understand the difference between absolute advantage ... Read Answer >>
  3. Can a Limited Liability Company (LLC) issue stock?

    Learn about a limited liability company, or LLC, and if it is able to issue stock. Understand the benefits of an LLC, both ... Read Answer >>
  4. How does a master limited partnership (MLP) differ from other business structures?

    Learn how master limited partnerships are unique hybrid legal structures combining the liquidity of shares in a company with ... Read Answer >>
  5. If you have a house that is under your company name and you want to sell it back ...

    The answer to this question really depends on the type of legal entity your business is operated through. Businesses may ... Read Answer >>
  6. Which factors drive the marginal propensity to consume?

    Understand how a limited liability company is taxed. Learn the tax structure of a single-owner LLC versus a multi-owner LLC. Read Answer >>
Hot Definitions
  1. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  2. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  3. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  4. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  5. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  6. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
Trading Center