Asked by Fatihah Masri on Jun 11, 2024
Verified
Statement I.S corporations offer their shareholders limited liability and pay no corporate income tax.
Statement II.The vast majority of business owners incorporate to secure limited liability.
A) Statement I is true and statement II is false.
B) Statement II is true and statement I is false.
C) Both statements are true.
D) Both statements are false.
S Corporations
A form of corporation in the United States that meets specific Internal Revenue Code requirements and passes income directly to shareholders to avoid double taxation.
Corporate Income Tax
A direct tax imposed by a jurisdiction on the income or profit of corporations.
- Gain an understanding of the attributes and configurations of diverse business formations, such as proprietorships, partnerships, corporations, and S corporations.
Verified Answer
LR
LILLIAN REANIERJun 17, 2024
Final Answer :
C
Explanation :
Both statements are true. S corporations indeed provide their shareholders with limited liability and do not pay corporate income tax themselves; instead, profits and losses are passed through to shareholders' personal tax returns. Additionally, one of the primary reasons business owners choose to incorporate (into any form of corporation, not just S corporations) is to secure limited liability, protecting their personal assets from business debts and claims.
Learning Objectives
- Gain an understanding of the attributes and configurations of diverse business formations, such as proprietorships, partnerships, corporations, and S corporations.