How is income taxed in the corporation?
Corporations are subject to double taxation. This means that profits of the corporation are taxed to the corporation at the applicable tax rate. The corporation is a taxpayer. Just like an individual, the corporation is subject to a tiered tax system. The tax rate generally goes up based on marginal income. When the corporation distributes any of these profits to the shareholder, the shareholder is subject to taxation at the dividend rate (currently 15%).