The IRS allows for a corporation to be taxed either as a "C corporation" or as
an "S corporation."
A C corporation's profits are taxed at two levels. This is commonly referred to as double
taxation. A C corporation pays a corporate tax on its corporate income (the first
tax). Then, the C corporation distributes profits to shareholders who pay income
tax on those dividends (the second tax).
One way to avoid the double taxation of a C corporation is to make a special election
with the IRS to be taxed as a S corporation, which is a pass-through entity taxed like a partnership
or a sole proprietorship. That way, there is only one level of taxation. The corporate
profits "pass through" to the owners, who pay taxes on the profits at
their individual tax rates.
To learn more and to speak with a representative, please call us at (888) 381-8758.