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

(1 point)
Responses

Sole proprietorship
Sole proprietorship

Partnership
Partnership

Corporation
Corporation

S corporation

Answer 1

The form of business ownership that may involve double taxation is a Corporation. In a corporation, the company pays taxes on its profits, and then shareholders also pay taxes on dividends they receive, leading to double taxation. In contrast, sole proprietorships and partnerships typically do not face double taxation as profits are taxed only at the owner's personal tax rate. S corporations are designed to avoid double taxation by passing profits directly to shareholders, who then report it on their personal tax returns.