[Nail Salon] Thea and Her Friends Josef and Danny, All

[Nail Salon] Thea and her friends Josef and Danny, all U.S. citizens, want to open a nail salon. They would all like to avoid personal liability for debts of the business and/or wrongful acts of each other. They would also like to minimize taxation. Thea is in favor of a corporation and asks if there is any problem with that form of business. Josef and Danny say that they are concerned about double taxation with a corporation and that they are in favor of a partnership, even if personal liability is a concern. Thea said that she was concerned about the deductibility of losses if the corporate form was chosen. She did some research and suggested an S corporation to Josef and Danny which she claimed would avoid the problem of double taxation.
-In regard to losses, what type of tax treatment would an S corporation provide?

A) Shareholders may deduct corporate losses from their personal income.
B) Losses may only be deducted from the S corporation's taxes, not the shareholders' personal income.
C) Losses may only be deducted from shareholders' personal income when the S corporation has shown a profit for at least two years.
D) Losses may only be deducted from shareholders' personal income when the S corporation has shown a profit for at least three straight years.
E) Losses may only be deducted from shareholders' personal income when the shareholder's gains from other endeavors exceed losses from the S corporation.