Oregon Construction Contractors (CCB) Practice Test

Do self-employment taxes apply to all types of business entities? True or False?

1. True

2. False

The correct answer is: False

Self-employment taxes do not apply to all types of business entities, which makes the statement false. Self-employment taxes primarily target individuals who operate as sole proprietors or partnerships, where the business income is reported on their personal tax returns. In contrast, certain business structures, such as corporations and limited liability companies (LLCs) that elect to be treated as corporations for tax purposes, may not be subject to self-employment taxes in the same way. Instead, corporate profits are taxed at the corporate level, and shareholders who receive dividends may not face self-employment taxes, although they may still be subject to individual income taxes. This distinction is crucial as it influences how business owners manage their taxes depending on the structure they choose for their operations. Understanding the implications of self-employment taxes on different business entities is vital for proper tax planning and compliance.