Which corporate structure is singly taxed?

Which corporate structure is singly taxed?

• A. C-Corporation
• B. B-Corporation
• C. S-Corporation
• D. LLC

Answer: (C)

Tax treatment of business entities determines whether income is taxed at the corporate level or passed through to owners. An S-Corporation is designed to be taxed as a pass-through entity, so the income, losses, deductions, and credits flow to the shareholders and are reported on their personal tax returns, meaning the entity itself is not taxed at the corporate level. This status is achieved by meeting eligibility requirements and electing S-status with the IRS (Form 2553), typically keeping the entity domestic, limiting shareholders to individuals (and a few other eligible entities), restricting to one class of stock, and staying under 100 shareholders. In contrast, a C-Corporation pays corporate income tax on its earnings, and when profits are distributed as dividends, those dividends are taxed again at the shareholder level—double taxation. A B-Corporation is a for-benefit corporation; its tax treatment follows standard corporate rules unless it elects otherwise. An LLC is typically taxed as a pass-through entity by default (income taxed to owners), though it can elect to be taxed as a corporation. Because income passes through to owners without a separate corporate tax levy, the S-Corporation structure is taxed only once, at the owners’ level.

Tax treatment of business entities determines whether income is taxed at the corporate level or passed through to owners. An S-Corporation is designed to be taxed as a pass-through entity, so the income, losses, deductions, and credits flow to the shareholders and are reported on their personal tax returns, meaning the entity itself is not taxed at the corporate level. This status is achieved by meeting eligibility requirements and electing S-status with the IRS (Form 2553), typically keeping the entity domestic, limiting shareholders to individuals (and a few other eligible entities), restricting to one class of stock, and staying under 100 shareholders.

In contrast, a C-Corporation pays corporate income tax on its earnings, and when profits are distributed as dividends, those dividends are taxed again at the shareholder level—double taxation. A B-Corporation is a for-benefit corporation; its tax treatment follows standard corporate rules unless it elects otherwise. An LLC is typically taxed as a pass-through entity by default (income taxed to owners), though it can elect to be taxed as a corporation.

Because income passes through to owners without a separate corporate tax levy, the S-Corporation structure is taxed only once, at the owners’ level.