Business ENewsletter March 04 2010

Corporate Taxation
A corporation is a distinct legal entity that must pay income and other taxes separately from its shareholders. As a result, net income is potentially subject to double income taxation. Net income is taxed at the corporate level on an annual basis and taxed again at the shareholder level when corporate profits are distributed to shareholders in the form of dividends. Certain smaller domestic corporations can elect to pass the net income directly to shareholders and thus avoid double taxation by making what is referred to as an "S" election. A corporation that has not made an "S" election is referred to as a C-corporation.