Which of the following statements about S corporations is true?
A) An S corporation has unlimited liability.
B) An S corporation is a flow-through entity for federal income tax purposes.
C) S corporations can only have 75 shareholders.
D) S corporations can have several classes of stock.

Question

Quizplus · Accepted Answer

S corporations are considered flow-through entities for federal income tax purposes, meaning that income, losses, deductions, and credits flow through to the shareholders, who then report these items on their personal tax returns. This avoids the double taxation issue that C corporations face.

Which of the Following Statements About S Corporations Is True