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In-Depth Incorporation FAQ

What is double-tax and how do I avoid paying it?

The major disadvantage of a C-Corporation is that it is subject to "double-taxation." It is called "double-taxation" because a C-Corporation's profits are taxed at the corporate level, and then again at the individual level when the profits are paid out to the owners.

Neither the S-Corporation nor the LLC is subject to the double tax. The S-Corporation and the LLC do not pay tax at the corporate level. Taxes will only be paid by the individual owners of the company when distributions are made.