Three Forms of Business Organization Quick Check1 of 51 of 5 ItemsQuestionHow does the taxation of a corporation differ from that of a sole proprietorship and partnership?(1 point)ResponsesThe corporation pays no tax.The corporation pays no tax.The earnings of shareholders are taxed directly.The earnings of shareholders are taxed directly.Taxes are said to pass through the corporation and onto owners.Taxes are said to pass through the corporation and onto owners.The corporation is taxed, and then shareholders are additionally taxed.The corporation is taxed, and then shareholders are additionally taxed.

Answer 1

The correct response is: The corporation is taxed, and then shareholders are additionally taxed.

In a corporation, profits are taxed at the corporate level, and then when those profits are distributed to shareholders as dividends, shareholders also pay taxes on those dividends (this is often referred to as "double taxation"). In contrast, sole proprietorships and partnerships have pass-through taxation, meaning the income is only taxed at the individual owners' tax rates.