Question

domain 1 preassessment
which corporation uses a double layer of taxation?
○ c corporation
○ s corporation
○ limited liability company
○ sole proprietorship

Explanation:

To determine which corporation uses double - layer taxation, we analyze each option:

• C corporation: It is a separate taxable entity. The corporation pays taxes on its profits at the corporate level, and then when profits are distributed as dividends to shareholders, the shareholders pay taxes on those dividends at the individual level. This is the double - layer (or double - taxation) of income.
• S corporation: It is a pass - through entity. The income of the S corporation is passed through to the shareholders, and is only taxed at the individual shareholder level, so there is no double taxation.
• Limited Liability Company (LLC): By default, an LLC is a pass - through entity for tax purposes. The income is taxed at the member (owner) level, and there is no separate corporate - level tax (in most cases, though it can elect to be taxed as a C corporation, but the default is pass - through).
• Sole proprietorship: It is not a corporation. The business and the owner are considered the same for tax purposes, and income is only taxed at the individual owner's level.

Answer:

A. C corporation