Question

Carol and her friends are creating a new company that ships monthly subscription boxes filled with beauty products to customers. Carol has multiple partners and she wants to avoid both double taxation and personal liability at the same time. In addition, she wants to pay the partners based on their company ownership percentage. Carol can accomplish her goals by forming what type of business entity?

Answer 1

Answer:

The correct answer is S corporation.

Explanation:

Carol and her friends are creating a new company that ships monthly subscription boxes filled with beauty products to customers.

Carol has multiple partners and she wants to avoid both double taxation and personal liability at the same time.  

She also wants to pay the partners based on their company ownership percentage.

She can do all this by forming an S corporation.  

A corporation is a business entity that is separate from its owners. The owners do not have personal liabilities for the debts of businesses.  

An S corporation is a type of corporation which fulfills specific Internal Revenue Code requirements. It is a small business with 100 or less than 100 shareholders. It gives limited liability benefits to a corporation and is taxed as a partnership. It can also pass income directly to shareholders and avoid double taxation.