Northwest Brands, Inc., is a small business incorporated in Minnesota. Its one class of stock is owned by twelve members of a single family. Ordinarily, corporate income is taxed at the corporate and shareholder levels. Is there a way for Northwest Brands to avoid this double taxation? Explain your answer

Yes, there is a way for Northwest Brands, Inc., to potentially avoid double taxation. They could elect to be taxed as an S corporation. S corporations are pass-through entities, meaning they don't pay federal income tax at the corporate level. Instead, profits and losses are passed through to the shareholders, and taxes are paid at the individual level.

However, for a corporation to qualify as an S corporation, it must meet certain eligibility criteria, including having no more than 100 shareholders, having only allowable types of shareholders (individuals, estates, certain trusts) and having a single class of stock.

If Northwest Brands meets the eligibility requirements and elects S corporation status, it can potentially avoid the double taxation inherent in C corporations (where corporate profits are taxed at the corporate level and then taxed again when distributed as dividends to shareholders).