The overwhelming majority of businesses in the U.S. are not C-corporations. Most businesses (about 94 percent are “pass-throughs”) that have their income “pass-through” to their owners to be taxed under the individual income tax.
Pass-through businesses include sole proprietorships, partnerships, and S-corporations. These businesses are complex because:
- the decisions made by owners are affected by both corporate and individual tax systems,
- they earn a majority of U.S. business income,
- the wide range in size and complexity,
- they operate economy-wide in a variety of industries,
- they represent unusual challenges to tax reform (affect both corporate and individual tax).
Here are some stats about pass-throughs and the current U.S. approach to taxing business.
1. Most businesses are pass-throughs. Of the 26 million businesses in 2014, 94 percent were pass-throughs, while only 6 percent were C-corporations (1.5 million firms).
2. Almost all businesses are small. In 2014, almost 99 percent of businesses, whether pass-through businesses or C-corporations, had $10 million or less in sales or receipts.
3. Pass-throughs are not necessarily small businesses.
4. Pass through businesses now earn a majority of business income.
https://www.brookings.edu/research/9-facts-about-pass-through-businesses/
https://files.taxfoundation.org/legacy/docs/TaxFoundation_SR227.pdf
https://www.brookings.edu/blog/up-front/2019/04/09/how-big-is-the-problem-of-tax-evasion/