It depends. Generally, the “pass-through” type of entity saves tax overall by eliminating tax at the entity level. Pass-through entity owners are taxed directly on their share of entity profits. Another pass-through advantage is that owners can take tax deductions for startup or operating losses, against their income from investments or other businesses.

For federal tax purposes the leading pass-through forms are general partnerships, limited partnerships, LLPs, LLCs, S-Corps, and sole proprietorships.

If you form a partnership (any type) or limited liability company, you may choose whether its treated for tax purposes as a corporation or a partnership (or, if you’re the only one in the LLC, as a corporation or disregarded for tax purposes). If incorporated, or you choose to have it treated as a corporation, you may qualify to have it treated as a pass-through by electing S-Corp status.