Pass-Through Entity

Definition ∞ A pass-through entity is a business structure that allows income to flow directly to its owners without being subject to corporate tax. In the context of digital assets, certain investment vehicles or funds might be structured as pass-through entities, meaning profits and losses are reported on the individual tax returns of the investors. This avoids double taxation, where income is taxed at both the corporate and individual levels. Examples include partnerships or limited liability companies.
Context ∞ The classification of digital asset investment vehicles as pass-through entities is a significant consideration in tax discussions and regulatory frameworks. News often covers how different jurisdictions treat these structures for tax purposes, impacting investor returns and compliance burdens. Understanding this concept is vital for optimizing tax strategies for digital asset investments.