Question

When operating a business the owners usually take distributions of money or property from their business.

What is the taxability of distributions of money or property from the business to the owner when the business is a C corporation, an S corporation or a partnership?

Answer 1

C Corporation are called regular Corporation which have to sustain double taxation. They have to pay income tax on the business income and after deduction of this tax they are given dividend which is also taxable.

For S Corporation tax liability is based on pass through concept. It means that business income is completely taxfree, however owners or stockeholder's income is individually taxable.

According to US Federal law, tax liability on general partnership is completely taxfree however these are also based on pass through concept in respect to tax liability . So business income is fully taxfree and individual tax liability occurs on partners.

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