THE WORKING GLOSSARY
Start with the vocabulary.
Short definitions to make the guides easier to use. These are orientation notes, not complete statements of tax or legal rules.
- Tax classification
- The federal tax treatment of an entity, which can differ from its legal form. An LLC is not a single federal tax classification.
- Pass-through business
- A business whose items generally flow to owners for tax reporting. Owner-level limitations and entity-level taxes can still apply.
- C corporation
- A corporation generally taxed separately from shareholders. Distributions and a future sale need analysis alongside annual corporate tax.
- S election
- An election for eligible corporations to receive S corporation tax treatment. Eligibility, timing, and ongoing compliance matter.
- Operating agreement
- A legal agreement governing an LLC's ownership and operations. Tax provisions should coordinate with the intended economics.
- Retained earnings
- An accounting measure of accumulated profits retained in a corporation. It is not automatically an amount available for tax-free withdrawal.