Which one of the following statements is correct?
A)Both partnerships and corporations incur double taxation.
B)Sole proprietorships and partnerships are taxed in a similar fashion.
C)Partnerships are the most complicated type of business to form.
D)Both partnerships and corporations have limited liability for general partners and shareholders.
E)All types of business formations have limited lives.

Question

Quizplus · Accepted Answer

Sole proprietorships and partnerships are both considered "pass-through" entities for tax purposes, meaning the income is taxed on the owners' personal tax returns, not at the business level. This contrasts with corporations, which are subject to double taxation (once at the corporate level and again on dividends to shareholders).

Which One of the Following Statements Is Correct