How Do Tax Codes Affect Different Types of Business Entities?
Different business entities such as sole proprietorships, partnerships, corporations, and LLCs are subject to varying tax codes: - Sole Proprietorships: Income is taxed on the owner's personal tax return. - Partnerships: Income is passed through to partners and taxed on their individual returns. - Corporations (C-Corp): Subject to double taxation, where income is taxed at the corporate level and dividends taxed at the shareholder level. - S-Corp: Income passes through to shareholders and is taxed at individual rates, avoiding double taxation.