Exam Prep For
Taxation of Business
Entities
FOUNDATION
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, What is the main tax idea behind EA Part 2 Business? Identify the entity, who pays tax, what return is filed, what flows through, basis
impact, limitations, and final tax treatment.
What tax form does a sole proprietor usually use to Schedule C, filed with the owner's individual Form 1040.
report business income?
What taxes does a sole proprietor usually pay on net Regular income tax and self-employment tax.
business income?
What is the main tax concept for a partnership? The partnership files an information return, but income/loss generally flows
through to the partners.
What form does a partnership file? Form 1065.
What form reports each partner's share of partnership Schedule K-1.
income, deductions, credits, gains, and losses?
Who generally pays federal income tax on partnership The partners, not the partnership itself.
income?
Can a partner owe tax on partnership income even if no Yes. Partners can be taxed on their share of partnership income even if they
cash was distributed? receive no cash.
What is the main tax concept for an S corporation? It is generally a flow-through entity, but shareholder basis limits loss deductions
and distribution treatment.
What form does an S corporation file? Form 1120-S.
What form reports each S corporation shareholder's Schedule K-1.
share of income, deductions, credits, gains, and losses?
What is the main tax concept for a C corporation? A C corporation is a separate taxpayer and may create double taxation.
What form does a C corporation file? Form 1120.
What does double taxation mean for a C corporation? The corporation pays tax on income, and shareholders may pay tax again when
profits are distributed as dividends.
What is an LLC for tax purposes? An LLC is a legal entity, but its tax classification depends on ownership and
elections.
What is the default tax treatment of a single-member Disregarded entity.
LLC?
Taxation of Business
Entities
FOUNDATION
** Expert-Verified Explanation
** Questions with Verified Answer
** New Edition | 2026-2027 Updated
** 100% Guaranteed Pass
** 100% Correct Answers | Graded A+
, What is the main tax idea behind EA Part 2 Business? Identify the entity, who pays tax, what return is filed, what flows through, basis
impact, limitations, and final tax treatment.
What tax form does a sole proprietor usually use to Schedule C, filed with the owner's individual Form 1040.
report business income?
What taxes does a sole proprietor usually pay on net Regular income tax and self-employment tax.
business income?
What is the main tax concept for a partnership? The partnership files an information return, but income/loss generally flows
through to the partners.
What form does a partnership file? Form 1065.
What form reports each partner's share of partnership Schedule K-1.
income, deductions, credits, gains, and losses?
Who generally pays federal income tax on partnership The partners, not the partnership itself.
income?
Can a partner owe tax on partnership income even if no Yes. Partners can be taxed on their share of partnership income even if they
cash was distributed? receive no cash.
What is the main tax concept for an S corporation? It is generally a flow-through entity, but shareholder basis limits loss deductions
and distribution treatment.
What form does an S corporation file? Form 1120-S.
What form reports each S corporation shareholder's Schedule K-1.
share of income, deductions, credits, gains, and losses?
What is the main tax concept for a C corporation? A C corporation is a separate taxpayer and may create double taxation.
What form does a C corporation file? Form 1120.
What does double taxation mean for a C corporation? The corporation pays tax on income, and shareholders may pay tax again when
profits are distributed as dividends.
What is an LLC for tax purposes? An LLC is a legal entity, but its tax classification depends on ownership and
elections.
What is the default tax treatment of a single-member Disregarded entity.
LLC?
