Corporations are subject to federal income taxes on their earnings, which is a key difference from partnerships. Partnerships pass their profits or losses directly to their partners to be reported on their individual tax returns, avoiding the double taxation faced by corporations.

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A Corporation

Question 46

Multiple Choice

A corporation:

A) Is less costly to organize than a partnership
B) Is subject to less regulation and supervision than a partnership
C) Is subject to federal income taxes on its earnings, whereas a partnership is not
D) Has an owner's capital account for each owner, whereas a partnership does not
E) None of the above

Correct Answer: