Final answer:
The Internal Revenue Service (IRS) considers a C corporation to be a separate legal entity, subjecting it to corporate income taxes on its profits. Owners of corporations benefit from limited liability and the ability to raise capital, but they also face multiple layers of taxation, including federal taxes on both corporate profits and personal income.
Step-by-step explanation:
The Internal Revenue Service (IRS) considers a C corporation to be a separate legal entity and taxes its earnings accordingly. Corporate income taxes are a significant category of taxes collected by the federal government, with C corporations being taxed on their profits according to various corporate tax brackets. As separate entities, corporations enjoy certain benefits, such as limited liability for their owners and the ability to raise funds through borrowing or the issuance of stocks and bonds.
Corporations offer protection to individual owners from personal liability, as they are considered legally separate from the individuals involved. This separation means that corporations may be taxed differently than individuals, with rates and regulations varying by jurisdiction. Besides, corporations are subject to other taxes such as property, payroll, excise, and value-added taxes, though these are typically not categorized as corporate taxes. In the case of a single-owner corporation where the individual is the sole employee, federal taxes would include corporate income tax on the business profits, individual income tax on the owner's salary, and payroll taxes on the wages the owner pays himself. This demonstrates the dual nature of taxation for corporations and their owners.