Which of the following statements regarding partnerships versus S corporations is false?
A) Ordinary income allocated from both types of passthrough entities is subject to self-employment tax.
B) Partners are not permitted to be employees of their partnerships, but S corporation shareholders can be employees of their S corporation.
C) S corporation shareholders are not liable for entity debts, but general partners are liable for partnership debts.
D) Partnerships have more flexibility than S corporations in the manner in which items are allocated to the owners.

Question

Quizplus · Accepted Answer

S corporation income allocated to shareholders is not subject to self-employment tax, unlike ordinary business income from a partnership which may be subject to self-employment tax for active partners.

Which of the Following Statements Regarding Partnerships Versus S Corporations