Double taxation of earnings is the primary financial disadvantage of the corporate form of business organization.

Question

Quizplus · Accepted Answer

This is because the corporation is considered a separate legal entity from its owners, and as such it must pay taxes on its earnings. Then, shareholders who receive dividends from the corporation also pay taxes on their individual income tax returns, resulting in double taxation of the same income.

Double Taxation of Earnings Is the Primary Financial Disadvantage of the Corporate