Corporations as Separate Taxpayers
The Separate Entity Principle
A corporation is generally treated as a legal entity separate from its shareholders. This means it owns property, enters into contracts, earns income, incurs expenses, and pays taxes independently.
- Owns assets in its own name.
- Files separate tax returns.
- Pays taxes on its taxable income.
- Shareholders and the corporation are generally treated as separate taxpayers.
Note
The legal separation between a corporation and its owners is one of the defining features of corporate taxation.
Summary
Corporations generally have independent tax responsibilities distinct from their owners.