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.