Businesses
S Corps and Partnerships are “pass-through” (or “flow-through”) entities because the income is “passed” directly to the owners and taxed at the individual rates (currently the maximum rate is 37% - plus 3.8% for investment income). A separate business tax return is required.
C Corps pay their own taxes, currently at the rate of 21%. Although the rate is much lower than the maximum individual rate, when money is withdrawn from the business the same income is taxed a second time as a dividend, usually at a max rate of 23.8%. A separate business tax return is required.
Disregarded entities are sole proprietorships that are reported on Schedule C and included with the owner’s individual tax return. No separate business tax return is required.