Corporations face double taxation, where both corporate profits and dividends to shareholders are taxed.
Questions & Step-by-step Solutions
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Q
Q: What is a disadvantage of a corporation?
Solution: Corporations face double taxation, where both corporate profits and dividends to shareholders are taxed.
Steps: 6
Step 1: Understand what a corporation is. A corporation is a type of business that is legally separate from its owners.
Step 2: Learn about corporate profits. When a corporation makes money, it earns profits.
Step 3: Know what dividends are. Dividends are payments made to shareholders from the corporation's profits.
Step 4: Recognize double taxation. This means that the corporation pays taxes on its profits first.
Step 5: Understand the second tax. After the corporation pays taxes on its profits, when it pays dividends to shareholders, those dividends are taxed again.
Step 6: Conclude that double taxation is a disadvantage because it means the same money is taxed twice.
