What entity type typically does NOT face double taxation?

Partnerships generally do not face double taxation because they are considered pass-through entities for tax purposes. This means that the income generated by the partnership is not taxed at the partnership level; instead, it is passed through to the individual partners, who report their share of the income on their personal tax returns. As a result, the income is only taxed once, at the individual partners' tax rates.

Unlike corporations, which may be subject to corporate income tax and then again taxed when dividends are distributed to shareholders, partnerships avoid this scenario. Limited Liability Companies (LLCs) also typically enjoy the benefits of pass-through taxation unless they elect to be taxed as corporations. Sole proprietorships are similarly treated as pass-through entities, wherein the owner reports business income on their individual tax returns. However, the partnership's specific structure and taxation method primarily highlight why it does not face double taxation.