Midterm Exam Flashcards
Flow through entities
generally don’t pay taxes because income from these entities flows through to their business owners who are responsible for paying taxes on the income
4 categories of business entities recognized by the US tax system
- C Corp
- S corp
- Partnership
- Sole Proprietorship
S corp - entity type; form used
Flow through entity; form 1120S
C corp - entity type; form used
separate taxpaying entity; form 1120
Partnership - entity type; form used
flow through entity; form 1065
sole proprietorship - entity type; form used
flow through entity; form 1040 schedule c
Under check the box regulations, entities that are legal corps under state law are treated as
C corps for tax purposes, subject to tax provisions in subchapter C of the IRC
However, they can qualify to make a special S election permitting them to be taxed as an S corp (FTE) and be subject to the tax provisions in subchapter S
Under check the box regulations, unincorporated entities are treated as
flow through entities
However, owners can opt to be taxed as a C corp
OR can opt to be taxed as a C corp and then make an S election
Under check the box regulations, unincorporated FTEs law are treated as
either partnerships, sole proprietorships or disregarded entities
disregarded entities
an entity that is considered to be the same as the owner
Unincorporated entities with more than one owner, including LLCs, are taxed as
partnerships
Unincorporated entities with only one individual owner, including single-member LLCs, are taxed as
sole proprietorships
Unincorporated entities with only one corporate owner, typically a single member LLCs, are usually
disregarded for tax purposes
Thus, income and losses from this single corporate-member LLC is reported as if it had originated from a division of the corp and is reported directly on the single member corp’s return
