jalva321
New Member

Business & farm

They way you explained it is not quite accurate. Corporations typically pay taxes on their earnings before distributing dividends to shareholders. The corporation's profits are taxed at the corporate tax rate 21%, and in some states the state corporate tax is deductible. After paying taxes, when the corporation distributes dividends to shareholders, those dividends are subject to personal income tax for the recipients not from the Corp as you stated. This creates what is known as "double taxation". Once at the corporate level and again at the individual level.