Which statement is true regarding S corporations?

A) They are considered partnerships yet taxed like corporations as long as they follow regulations.
B) They cannot have more than 80 shareholders.
C) Shareholders do not report profit on their personal income tax forms.
D) They may be formed under state law.
E) Income is taxed only when distributed to the shareholders, who must not report the income on their personal income tax forms.

S Corporations

A unique status enabling small businesses to transfer corporate profits, losses, deductions, and tax credits directly to their shareholders for the purpose of federal taxation.

Shareholders

Persons or entities that hold ownership interest in a corporation through stock, participating in its profits and decisions.

Personal Income Tax

A tax levied by government on individuals or households based on their total yearly income from all sources.