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Pre-Tax Income for "Pass Through Entities"

For "pass-through" entities such as an LLC (taxed as either an S-corporation or a partnership), the amount listed as "net income" is in fact equal to "pretax income" or "pretax profits" or "pretax earnings".

In other words, because LLC's do not pay "entity level income tax" (all profits "pass through" to the individual owners), their net income (which is technically after-tax income) is the same as pretax income or pretax earnings or pretax profits (as in the first entry on step 3).

Gross profit is another "level" of profit which does not apply to our algorithm.

For example, enter the net income listed on the y-t-d income statement on the first line of step 3.

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