A handful of entities sit outside the sole-prop/partnership/S/C lattice entirely, each with a purpose-built regime in the Code that swaps ordinary entity-level tax for conduit treatment — provided the entity meets strict income and distribution tests. You will meet most of these as an investor rather than a founder, but the mechanics decide how the income reaches you and what it is taxed as.
A Real Estate Investment Trust (REIT) under IRC §§856–859, “Real estate investment trusts” escapes entity-level tax by distributing at least 90% of its taxable income to shareholders each year and holding at least 75% of its assets in real estate. The cost of the conduit is that most REIT dividends are ordinary income, not qualified — though IRC §199A grants a 20% deduction on that ordinary portion, with no wage test or income limit, one of the cleanest pass-through deductions left (section “Constructing a Portfolio”).
A Regulated Investment Company (RIC) under IRC §§851–855, “Regulated investment companies” is the wrapper inside virtually every mutual fund and ETF. Meet the diversification and 90%-distribution tests and the fund pays no entity-level tax; income and gains flow through to shareholders and keep their character — qualified dividends stay qualified, long-term gains stay long-term. This conduit is why a fund can hold thousands of securities without stacking a second layer of tax on top (section “The Structural Obsolescence of Mutual Funds in Taxable Accounts”).
A Homeowners Association (HOA) can elect under IRC §528, “Certain homeowners associations” to file the one-page Form 1120-H, which exempts its exempt-function income (member dues and assessments) and taxes only non-member income — interest, facility rentals, laundry — at a flat 30%. Filing a regular Form 1120 instead offers lower graduated rates but exposes the dues to tax. Most associations elect 1120-H every year for the simplicity and the audit safety.
A IRC §527, “Political organizations” organization — a campaign committee, PAC, or super PAC — is tax-exempt on the contributions it raises for political activity and taxed (on Form 1120-POL) only on its investment income. It is the rare entity whose core receipts are exempt while its passive earnings are not.
A cooperative under IRC §§1381–1388, “Cooperatives and their patrons” — agricultural, retail, or utility — deducts the patronage dividends it returns to its member-patrons, collapsing its own tax to near zero and taxing the income once, in the patrons’ hands.
The through-line: each regime grants a single layer of tax in exchange for surrendering retained earnings — the entity must distribute to keep its conduit status. Tax-exempt charities and other IRC §501(c) organizations sit one step further out, paying no tax on mission income at all but owing the unrelated-business-income tax (UBTI) on any commercial activity unrelated to their exempt purpose (chapter “Charity” covers the donor side).