Final answer:
Corporations are the type of business entity required to pay tax on its income separately from its owners, as they are considered separate legal entities. Owners of corporations also pay individual income tax on their salary, payroll taxes, and potentially face 'double taxation' on dividends.
Step-by-step explanation:
The type of business entity that is required to pay tax on its income separately from its owners is a corporation. Corporations are viewed as separate legal entities from their owners (shareholders). Consequently, corporations must pay corporate income taxes on the profits they earn. This is in contrast to other business structures, such as sole proprietorships or partnerships, where the business income is passed through to the owners' individual tax returns and taxed at their personal income tax rates.
Additionally, if an individual is the sole owner and employee of a corporation, they must pay not only the corporate income tax on profits but also individual income tax on their salary, and payroll taxes on the wages they pay themselves. These payroll taxes include social security and Medicare taxes. Moreover, corporations may face what is often referred to as 'double taxation' where the company's profits are taxed, and any dividends paid to shareholders are again taxed on the shareholders' personal tax returns.