Which of the following would be most likely to benefit from choosing S corporation status?
A)Startup companies anticipating net losses.
B)Corporations where net profits before any compensation to shareholders is less than $100,000 per year.
C)Highly profitable firms with substantial dividends to pay out to shareholders.
D)A and C only

Question

Quizplus · Accepted Answer

Startup companies anticipating net losses can benefit from S corporation status because losses can be passed through to shareholders and may offset other income. Highly profitable firms with substantial dividends can benefit from S corporation status because they may be eligible for special tax treatment on those dividends. In contrast, corporations where net profits before any compensation to shareholders is less than $100,000 per year would not benefit as much from S corporation status because they may not have significant tax liability to reduce.

Which of the Following Would Be Most Likely to Benefit