“Double taxation” refers to the two “levels” of tax that are assessed by the IRS on profits earned by C Corporations–a “C Corporation” simply refers to a corporation that is taxed according to subchapter “C” of the US Tax Code–or other entities that elect to be taxed as C Corporations. The first level of taxation is at the corporate level; these taxes are assessed on the corporation’s profits before the company distributes any dividends to shareholders. The second level of taxation applies at the individual level when the corporation distributes dividends to individual shareholders.

How to Avoid Double Taxation

Entities that elect to be taxed as C Corporations (or are taxed a C Corporations by default) are subject to double taxation. Businesses…

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