{"ok":true,"canonical_url":"https://dealroom.so/glossary/pass-through","api_url":"https://dealroom.so/api/public/glossary/pass-through","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"pass-through","term":"Pass-Through","group":"Reading the business","definition":"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":"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.","url":"https://dealroom.so/glossary/pass-through","official_sources":[],"related":[{"slug":"llc","term":"LLC","url":"https://dealroom.so/glossary/llc"},{"slug":"sde","term":"SDE","url":"https://dealroom.so/glossary/sde"},{"slug":"tax-return","term":"Tax return","url":"https://dealroom.so/glossary/tax-return"},{"slug":"irs-transcripts","term":"IRS transcripts (4506-T)","url":"https://dealroom.so/glossary/irs-transcripts"}],"related_questions":[{"question":"If I am buying out a partner, does the SBA require the business to pass a cash flow test post-acquisition?","url":"https://dealroom.so/sba-7a/questions/if-i-am-buying-out-a-partner-does-the-sba-require-the-business-to-pass-a-cash-flow-test-po"},{"question":"What is the highest possible loan amount available through SBA 7(a)?","url":"https://dealroom.so/sba-loans/basics/what-is-the-highest-possible-loan-amount-available-through-sba-7-a"},{"question":"What is the maximum loan amount available through the SBA 7(a) program?","url":"https://dealroom.so/sba-loans/basics/what-is-the-maximum-loan-amount-available-through-the-sba-7-a-program"},{"question":"What are the requirements for assigning secondary market loans through SBA Form 1088?","url":"https://dealroom.so/for-lenders/questions/what-are-the-requirements-for-assigning-secondary-market-loans-through-sba-form-1088"},{"question":"When does common ownership through a trust or estate create affiliation for size purposes?","url":"https://dealroom.so/for-lenders/questions/when-does-common-ownership-through-a-trust-or-estate-create-affiliation-for-size-purposes"},{"question":"What is the highest total loan amount available through the SBA 7(a) program?","url":"https://dealroom.so/sba-loans/basics/what-is-the-highest-total-loan-amount-available-through-the-sba-7-a-program"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Pass-Through","url":"https://dealroom.so/glossary/pass-through","source_type":"DealRoom Data"}}