Ray is starting a new business with a friend and trying to decide between a C corporation,S corporation,and partnership.Which of the following statements regarding his decision is correct?
A)An S corporation owner must pay income taxes only on the salary received.
B)A partner in a partnership is taxed on his or her share of partnership income.
C)A shareholder in a C corporation is taxed on his or her share of corporate income.
D)S corporations pay taxes on their current year income.

Question

Quizplus · Accepted Answer

Ray should choose a partnership, as it offers pass-through taxation, where the partners are only taxed on their individual share of the income. Both C corporations and S corporations are taxed as entities, with C corporation shareholders being taxed on their share of the corporate income and S corporation owners being taxed on both their salary and share of income. Choosing a partnership allows for more flexibility and a simpler tax structure.

Ray Is Starting a New Business with a Friend and Trying