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Question 1
Sherrie and Al operate a business and are thinking of incorporating. Which type of corporation would allow them to avoid double taxation?
Correct
Incorrect!
Correct The creation of the S Corporation business form was done to allow a middle ground between the limited liability aspects of a full corporation and the tax attributes of a partnership. As such, an S corporation adopts the characteristic of a partnership that requires the taxing authority to treat an S Corp as a 'pass through' entity where the corporation is not taxed on its profits, but the individual shareholders are taxed on the distribution that the firm makes to them.
Incorrect! The creation of the S Corporation business form was done to allow a middle ground between the limited liability aspects of a full corporation and the tax attributes of a partnership. As such, an S corporation adopts the characteristic of a partnership that requires the taxing authority to treat an S Corp as a 'pass through' entity where the corporation is not taxed on its profits, but the individual shareholders are taxed on the distribution that the firm makes to them.
