CORPORATE TAX EXAM REVIEW Q&A

CORPORATE TAX EXAM REVIEW Q&A
Partnership Advantages - Answer--no double taxation
-profits = taxed when earned (not withdrawn)
-losses can offset other income

Partnership Disadvantages - Answer--all profits = taxed when earned
-partners: pay self-employment
-not employees

C-Corporations Characteristics - Answer--separate taxpaying entity
-legally separate, incorporated

C-Corporations Advantages - Answer--tax SAVINGS if earnings are NOT distributed
-employees: fringe benefits
-no self-employment

C-Corporations Disadvantages - Answer--double taxation: dividends paid, corporation's
stock is sold
-hard to withdraw money
-NOLs: only offset income from other taxable years
-capital losses: no benefit

S-Corporations Characteristics - Answer--corporation that chooses (elects) to be taxed
like a partnership
-make a separate S-Selection: limits on the number and type of shareholders

S-Corporations Advantages - Answer--shareholders pay taxes: so can use losses to
offset other income
-capital losses, gain = flow through
-easy to contribute, withdraw money

S-Corporations Disadvantages - Answer--all income is taxed when EARNED
-if marginal tax rate is more than c-corporation rates: may reduce return

Limited Liability Companies (LLC) - Answer-taxed like a partnership - but with the
limited liability of a corporation

Limited Liability Partnerships (LLP) - Answer-partnership - where the partners are not
liable for the negligence of other partners (professional services)

Check-the-Box Regulations - Answer-unincorporated businesses are able to choose
whether to be taxed as a partnership or a corporation; an eligible entity must file its
classification using Form 8832