A type of business that is taxed on its earnings and then taxed again when the shareholders report their earnings is called what?

A corporation is classified as a separate legal entity from its owners, which allows it to be taxed independently on its earnings. This is known as "double taxation," a characteristic unique to corporations. Initially, the corporation pays taxes on its profits. Then, when these profits are distributed to shareholders as dividends, the shareholders must also report these earnings and pay personal income tax on them.

This structure can lead to a situation where the same income is taxed twice. In contrast, business structures like proprietorships and partnerships do not experience double taxation, as their earnings are typically taxed once at the individual level. Limited liability companies (LLCs), while also offering liability protection and different tax treatment options, are generally treated as pass-through entities, meaning their profits aren’t taxed at the corporate level.