In the United States, regular corporate entities must pay federal income tax on annual earnings, and upon the subsequent distribution of these earnings, individual shareholders receiving dividends must pay tax as well. Some corporations (usually those that do not offer shares on a public exchange) may seek to avoid duplicate levels of taxation by organizing as S corporations or limited liability companies. The Internal Revenue Service treats these special corporations similar to partnerships (IRC Sections 701-777) in that taxation of annual earnings applies only at the shareholder, and not the entity, level.
Source: Definition of Corporate Tax Planning | Sapling.com
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