Corporations pay their own income tax on corporate income.Stockholders pay personal income tax on the dividends received from corporations.This is an example of ________.

Question

Quizplus · Accepted Answer

Double taxation is a tax principle where the same income is taxed twice - once when the corporation earns it as corporate income and then again when the stockholders receive it as dividends and pay personal income tax on it. This principle is illustrated in the given example. Continuous life refers to the legal existence of a company that extends beyond the life of its owners. No mutual agency refers to the lack of authority of one partner to legally bind another partner in a partnership. A limited liability company is a type of business structure that combines the benefits of a corporation and a partnership, providing limited liability protection for its owners (members) and pass-through taxation of profits and losses.

Corporations Pay Their Own Income Tax on Corporate Income