Tee Time Golf Resort has the opportunity to buy 1,000 acres of property adjacent to its award-winning 18-hole golf course. After talking with her banker and her lawyer, the owner is encouraged to begin the paperwork to change from a limited liability company form of business ownership to a corporation. You applaud this strategy because she will eliminate the problem of double taxation.

Question

Quizplus · Accepted Answer

C corporations (not LLCs) face the disadvantage of double taxation. A C corporation's income is taxed twice. First the corporation pays tax on all income before it can distribute any, as dividends, to stockholders. The stockholders pay income tax on the dividends they receive.

Tee Time Golf Resort Has the Opportunity to Buy 1,000