S-corp Flashcards
What is an S-Corp?
An S-Corp is a special type of corporation that meets specific Internal Revenue Code requirements.
True or False: S-Corps allow for pass-through taxation.
True
Fill in the blank: S-Corps are limited to _____ shareholders.
100
What is a major tax advantage of an S-Corp?
Avoidance of double taxation on corporate income.
Which of the following is a disadvantage of an S-Corp? A) Limited liability B) Increased paperwork C) Pass-through taxation
B) Increased paperwork
True or False: All corporations can elect S-Corp status.
False
What type of income is not eligible for S-Corp pass-through taxation?
Certain types of passive income above certain thresholds.
What is the maximum number of shareholders allowed in an S-Corp?
100 shareholders.
True or False: An S-Corp can have non-resident alien shareholders.
False
What form must be filed to elect S-Corp status?
Form 2553
Fill in the blank: S-Corps must adhere to _____ formalities.
corporate
What is one benefit of an S-Corp regarding self-employment taxes?
Shareholders can take a salary and receive dividends, potentially reducing self-employment taxes.
True or False: S-Corps can issue multiple classes of stock.
False
What is a potential disadvantage of an S-Corp regarding distributions?
Distributions may be subject to additional taxes if not properly managed.
What type of business entities can elect to become an S-Corp?
Domestic corporations.
Fill in the blank: An S-Corp must have only _____ owners.
individuals, certain trusts, or estates.
What is the primary purpose of an S-Corp election?
To avoid double taxation on corporate income.
True or False: S-Corps can have unlimited passive income.
False
What is the main benefit of an S-Corp for small businesses?
Limited liability protection combined with favorable tax treatment.
What happens if an S-Corp exceeds the shareholder limit?
It may lose its S-Corp status.
Fill in the blank: An S-Corp cannot have _____ shareholders.
corporations or partnerships.
What is one reason business owners might choose not to elect S-Corp status?
Complexity and cost of compliance.
True or False: S-Corp shareholders can participate in the management of the business.
True
What is a potential tax disadvantage of an S-Corp?
Possible limitations on the types of deductions available.
What document outlines the operational procedures of an S-Corp?
Bylaws
True or False: S-Corps must hold annual meetings.
True
