If I am in a limited liability partnership or in a limited liability company (which receives flow through tax treatment), how are the assets and income of the LLC taxed?
I think the way it works is:
When there is flow through tax treatment, income and assets that are part of the business are treated as though it were personal income of the individual. For some reason this can result in either the flow through income being UNTAXED or the flow through income being taxed as a capital gains. Either way this allows a lower tax rate for LLC profits. I'm not sure that correct. I know it has something to do with capital accounts.
Also, is it true that if the LLC loses money, that loss can be offset against other taxable income resulting in a lower total taxation?