Olivia and Liam have heard complaints from fellow business owners about the tax burden they face due to their company's business structure. What form of business ownership may involve double taxation?

Question

A. sole proprietorship
B. partnership
C. corporation
D. S corporation

Answer 1

C. corporation

C corporations are subject to double taxation because the corporation's profits are taxed at the corporate level, and then any dividends distributed to shareholders are taxed again at the individual level. In contrast, sole proprietorships and partnerships typically face single taxation, and S corporations allow profits and losses to be passed through to shareholders to avoid double taxation.