Modern Counsel for Growing Companies
In plain English
An entity treated as not separate from its owner for a particular tax purpose. A single-member LLC is commonly disregarded for federal income tax unless it elects corporate treatment, but separate treatment can apply for employment and certain excise taxes. Tax disregard does not itself eliminate state-law liability protection.
Types and key distinctions
Pass-Through Taxation
Tax treatment under which business income, losses, or other items are generally reported by owners rather than subjected to a separate federal entity-level income tax. Partnership and S corporation rules differ, and owner-level limitations can apply. Pass-through treatment does not eliminate employment taxes, state taxes, or all entity-level liabilities.