Match the term with the entity to which it applies.
-Double taxation
A)Sole Proprietorship.
B)Partnership.
C)Corporation.
D)S Corporation.

Question

Quizplus · Accepted Answer

Double taxation applies to corporations. This means that both the corporation and its shareholders are taxed on the corporation's profits. The corporation pays taxes on its profits, and then if those profits are distributed as dividends to shareholders, the shareholders also pay taxes on the same profits.

Sole proprietorships and partnerships are not subject to double taxation because they are not separate legal entities from their owners. Instead, the profits and losses of these businesses pass through to their owners and are reported on their personal tax returns.

S corporations, on the other hand, are a type of corporation that allows for pass-through taxation, meaning that the corporation itself is not taxed on its profits - instead, the profits pass through to the shareholders and are reported on their personal tax returns. So, S corporations also do not face double taxation.

Match the Term with the Entity to Which It Applies