Pass-through entity
A business whose profit is taxed on the owners' personal returns, not at the business level.
A pass-through entity doesn't pay federal income tax itself. Its profit passes through to the owners, who report their share on their own returns. Sole proprietorships, partnerships, most LLCs and S corps all work this way. C corps don't.
The IRS LLC page shows how it plays out for LLCs: a single-member LLC is disregarded and its profit goes on the owner's Schedule C, and a multi-member LLC is a partnership by default. An S corp files Form 1120-S and gives each shareholder a Schedule K-1 with their share.
The owner pays tax on the profit whether or not they take the money out. That is the trade-off against a C corp: one layer of tax instead of two, but no option to leave profit in the business at a lower rate.
Pass-through owners can take the qualified business income deduction, up to 20% of business profit, which C corp shareholders can't.
Some states charge pass-through entities their own taxes anyway. Tennessee taxes LLCs and S corps on their income like corporations, for example.