How are corporate profits generally taxed?

Corporate profits are generally taxed through corporate income tax, which is levied on the earnings generated by the corporation. This tax is imposed directly on the corporation itself, meaning that the profits earned from its business activities are subject to taxation before any distributions are made to shareholders.

This structure reflects the principle that a corporation is treated as a separate legal entity; thus, it must pay taxes on its income independently of its shareholders. After the corporation pays its income tax, any distributions to shareholders, such as dividends, may also be subject to taxation at the individual level under personal income tax. This can lead to a situation known as "double taxation," where the same profits are taxed first at the corporate level and then again at the individual level when distributed as dividends.

The other options presented do not accurately reflect the fundamental principles of corporate taxation. For instance, taxing profits solely as individual income tax for shareholders would ignore the corporate structure and its separate legal status. Similarly, assessing taxes based solely on the value of assets owned does not align with how income is generated and taxed. Finally, the notion of taxing profits only when dividends are distributed overlooks the fact that corporations incur tax liabilities based on their profits, regardless of whether they choose to distribute those earnings.