The Federal Income Taxation of Corporations, Partnerships, Limited Liability Companies and Their Owners, Part One

Abstract

The law of the United States takes two fundamentally different approaches to taxing business income. The income of many corporations is taxed to the corporation when earned and again to the shareholders when corporate profits are distributed to them. In contrast, the income of most corporations, partnerships and limited liability companies is taxed only once, directly to the owners of the enterprise when the income is earned. Part One of this casebook provides an historical overview of the dramatically different effects of these alternative approaches to taxing business income. Part One also considers a proposal for taxing all enterprises in a uniform manner, regardless of their legal form.

Keywords: corporate tax, partnership tax, entity tax, taxation of business income, limited liability companies

JEL Classification: H24, H25