Finance
Basis
Basis is an owner's investment in a business for tax purposes, used to determine gain or loss on sale and the extent to which losses and distributions can be taken tax-free. Basis increases with contributions and allocated profit, and decreases with distributions and allocated losses.
In plain terms: Your tax stake in the company, which goes up and down with what you put in and take out.
Why it matters
Rarely tracked by small pass-through owners and occasionally expensive. Distributions exceeding basis can create taxable gain, and losses cannot be deducted beyond basis.
Read the full guideUS business taxes