Owners or partners of flow-through entities report their income and deductions on personal tax returns, as the entities do not pay corporate income taxes. Instead, profits are passed through to the individual owners to be included on their tax returns, and each partner pays taxes on their share of income.
Owners or partners of flow-through entities report their share of the entity's income and deductions on their personal tax returns. Flow-through entities, such as partnerships, S corporations, and limited liability companies (LLCs) that choose to be treated as partnerships, do not pay income taxes at the corporate level. Instead, the income is 'passed through' to the individual partners or owners. Each owner includes their respective share of income, deductions, credits, and other tax items on their personal tax return.
General partnerships involve sharing profits among stakeholders, which means that each partner is responsible for paying taxes on their portion of the income. Importantly, the business itself does not pay taxes, which is a significant aspect of this type of organization that is subject to little government regulation and can raise more capital than sole proprietorships due to the greater assets contributed by the partners.