Which one of the following statements is correct?
A) Both partnerships and corporations incur double taxation.
B) Both sole proprietorships and partnerships are taxed in a similar fashion.
C) Partnerships are the most complicated type of business to form.
D) Both partnerships and corporations have bylaws.
E) All types of business formations have limited lives.

Question

Quizplus · Accepted Answer

Sole proprietorships and partnerships are both taxed in a similar manner, where the income is passed through to the owners or partners and taxed on their individual tax returns. This avoids the double taxation that corporations can face, where the corporation itself is taxed and then the dividends paid to shareholders are also taxed. Partnerships and sole proprietorships do not have the complexity of formation that corporations do, nor do they typically have bylaws, which are more associated with corporations. Additionally, not all types of business formations have limited lives; for example, corporations can continue indefinitely, while sole proprietorships and partnerships may end with the death or withdrawal of an owner or partner.

Which One of the Following Statements Is Correct