Glossary · Reading the business
Pass-Through
In short
A business structure (like an S-Corp or LLC) where profits and losses are "passed through" directly to the owners' personal tax returns, avoiding corporate-level taxation.
What it means in a deal
Most small businesses are structured as pass-through entities. This means the business itself doesn't pay income tax; instead, the owners report the income (or loss) on their personal 1040s. When reviewing financials, you'll need the seller's personal tax returns (Form 1040s with K-1s or Schedule C) to verify business income, not just corporate returns.
Related terms
Common questions about Pass-Through
- If I am buying out a partner, does the SBA require the business to pass a cash flow test post-acquisition?
- What is the highest possible loan amount available through SBA 7(a)?
- What is the maximum loan amount available through the SBA 7(a) program?
- What are the requirements for assigning secondary market loans through SBA Form 1088?
- When does common ownership through a trust or estate create affiliation for size purposes?
- What is the highest total loan amount available through the SBA 7(a) program?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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