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The term “pass-through business” refers to business entities whose income or losses are reported directly on the business owners’ individual 1040 returns, as opposed to the business itself being taxed, as is the case with C-corporations. Pass-through entities include partnerships that issue K-1s, which report each owner’s share of the business’s income or losses; these figures are transferred to each owner’s 1040. Self-employed taxpayers who report their income on Schedule C are also considered pass-through entities, as business profit or loss is included on these individuals’ 1040s.