Entity Taxation

Entity taxation refers to how different types of business organizations are taxed by the government. The way a business pays taxes depends on its structure—such as sole proprietorships, partnerships, corporations, or LLCs. For example, a corporation is usually taxed as a separate entity, paying its own taxes on profits. In contrast, a sole proprietorship’s income is taxed directly to the owner. Understanding entity taxation helps business owners plan finances, comply with laws, and optimize their tax liabilities effectively.