Question

Which taxation type allows qualifying businesses to be treated as a partnership for tax purposes, thereby avoiding double taxation associated with C corps?

a) Treated as a partnership
b) Allows owners to avoid unlimited liability
c) Allows qualifying business to be treated as a partnership for tax purposes, thereby avoiding double taxation associated with C corps

Answer 1

Limited Liability Companies (LLCs) allow qualifying businesses to be a) treated as partnerships for tax purposes, avoiding double taxation associated with C corps.

Step-by-step explanation:

The taxation type that allows qualifying businesses to be treated as a partnership for tax purposes, thereby avoiding double taxation associated with C corps, is a limited liability company (LLC).

LLCs provide the benefit of limiting the partner's liability to their investment in the company, so the owners of the business would not risk losing their personal assets if the company were to fail. Additionally, each partner pays taxes on their share of the income instead of the business itself having to pay taxes.

For example, suppose you and another individual start an LLC together. As partners, you both share in the profits and losses of the business. However, for tax purposes, you would each report your share of the income on your individual tax returns, avoiding double taxation.