Question

To raise capital, Anna Moreno and Talia Black plan to sell stock to between 108 and 200 investors. They also want to avoid double taxation. Which type of business ownership would you recommend?
A. Regular corporation
B. S-corporation
C. Cooperative
D. Limited-liability company
E. Limited partnership

Answer 1

Answer:

B. S-corporation

Explanation:

An S corporation is a small business corporation whose shareholders elect to register and operate as a corporation,  but be taxed as a sole proprietorship or a partnership. An S corporation is allowed to pass corporate deductions, income, and losses through to the shareholders in tax calculation.

The income of an S corporation will be regarded as the income of shareholders.  As such, once the S corporation pays corporate income tax, shareholders will not be expected to pay further income tax from their gains in the business. An s corporation, therefore, protects the shareholders from double taxation.