Asked by Daysi Antillo on Jun 04, 2024
Verified
Is there an impediment to the business qualifying as an S Corporation, based on the information available?
A) Yes, because there must be at least 100 shareholders involved.
B) Yes, because a business must operate as a partnership for at least two years before converting to an S corporation.
C) Yes, because a business must operate as a general corporation for at least two years before converting to an S corporation.
D) Yes, because at least one-third of the shareholders in an S corporation must be corporations.
E) No.
Double Taxation
The imposition of tax by two or more jurisdictions on the same declared income, asset, or financial transaction.
S Corporation
A type of corporation in the United States that elects to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code, allowing profits to be passed directly to shareholders and avoid double taxation.
- Differentiate between S corporations and other forms of business entities concerning taxation and shareholder liabilities.
Verified Answer
JP
Jasmine PierreJun 05, 2024
Final Answer :
E
Explanation :
Based on the information provided, there is no impediment to the business qualifying as an S Corporation. The concerns mentioned, such as the number of shareholders, the requirement to operate as a partnership or general corporation before converting, and the proportion of shareholders that must be corporations, do not apply to S Corporation eligibility criteria. S Corporations can avoid double taxation similar to partnerships while providing limited liability to its owners, making it a suitable option for Thea, Josef, and Danny.
Learning Objectives
- Differentiate between S corporations and other forms of business entities concerning taxation and shareholder liabilities.