E.38 Characteristics and income taxation of business entities Flashcards
(20 cards)
Which of the following business entities is not a pass-through entity for tax purposes?
A) Sole proprietorship
B) Partnership
C) C Corporation
D) S Corporation
C Corporation is not a pass-through entity for tax purposes, meaning that the corporation pays taxes on its income, and shareholders also pay taxes on the dividends they receive.
E.38 Characteristics and income taxation of business entities
Which business entity is most likely to be subject to double taxation?
A) Sole proprietorship
B) Partnership
C) C Corporation
D) S Corporation
C Corporation is most likely to be subject to double taxation because the corporation pays taxes on its income, and shareholders also pay taxes on the dividends they receive.
E.38 Characteristics and income taxation of business entities
Which business entity provides the most flexibility in terms of management and ownership structure?
A) Sole proprietorship
B) Partnership
C) Limited Liability Company (LLC)
D) S Corporation
LLC provides the most flexibility in terms of management and ownership structure, as it can be managed by its owners or a designated manager, and there are no restrictions on the number or type of owners.
E.38 Characteristics and income taxation of business entities
Which business entity is required to have a board of directors?
A) Sole proprietorship
B) Partnership
C) C Corporation
D) S Corporation
C Corporation is required to have a board of directors, which is responsible for making major decisions and overseeing the management of the corporation.
E.38 Characteristics and income taxation of business entities
Which business entity allows for a pass-through of losses to its owners?
A) Sole proprietorship
B) Partnership
C) C Corporation
D) S Corporation
Partnership allows for a pass-through of losses to its owners, which can be used to offset income from other sources.
E.38 Characteristics and income taxation of business entities
Which business entity provides the most protection for its owners from personal liability?
A) Sole proprietorship
B) Partnership
C) C Corporation
D) Limited Liability Company (LLC)
LLC provides the most protection for its owners from personal liability, as the owners are not personally responsible for the debts and obligations of the company.
E.38 Characteristics and income taxation of business entities
Which business entity is required to file a separate tax return?
A) Sole proprietorship
B) Partnership
C) C Corporation
D) S Corporation
C Corporation is required to file a separate tax return, and pay taxes on its income.
E.38 Characteristics and income taxation of business entities
Which business entity has the fewest formalities to maintain?
A) Sole proprietorship
B) Partnership
C) C Corporation
D) S Corporation
Sole proprietorship has the fewest formalities to maintain, as there are no legal requirements for maintaining the business or keeping records.
E.38 Characteristics and income taxation of business entities
Which business entity is not allowed to have more than 100 shareholders?
A) Sole proprietorship
B) Partnership
C) C Corporation
D) S Corporation
S Corporation is not allowed to have more than 100 shareholders, and all shareholders must be individuals or certain types of trusts.
E.38 Characteristics and income taxation of business entities
Which business entity is taxed as a partnership but provides limited liability protection to its owners?
A) Sole proprietorship
B) Partnership
C) C Corporation
D) Limited Liability Company (LLC)
LLC is taxed as a partnership but provides limited liability protection to its owners, making it a popular choice for small businesses.
E.38 Characteristics and income taxation of business entities
Alex and Ben are starting a new business. They are considering a partnership and a limited liability company (LLC). Which entity would be better if they want to limit their personal liability?
A) Partnership
B) LLC
C) Either A or B
D) Neither A nor B
LLC provides limited liability protection to its owners, making it a better choice for Alex and Ben if they want to limit their personal liability.
E.38 Characteristics and income taxation of business entities
Emily is the sole owner of a small retail store. Which entity would be the most tax-efficient for her business?
A) Sole proprietorship
B) Partnership
C) C Corporation
D) S Corporation
Sole proprietorship would be the most tax-efficient for Emily’s business, as it is not subject to corporate tax and she would report the income and expenses on her personal tax return.
E.38 Characteristics and income taxation of business entities
Jane and Mark are partners in a law firm. They want to add a new partner but are concerned about losing control of the business. Which entity would be the best option for them?
A) Partnership
B) C Corporation
C) S Corporation
D) LLC
LLC would be the best option for Jane and Mark, as it provides flexibility in management and ownership, and they can structure the agreement to maintain control over the business.
E.38 Characteristics and income taxation of business entities
John is the owner of a small business and wants to raise capital by issuing shares to investors. Which entity would be the most suitable for him?
A) Sole proprietorship
B) Partnership
C) C Corporation
D) S Corporation
C Corporation would be the most suitable for John, as it allows for the issuance of stock and is more attractive to investors due to the potential for growth and profitability.
E.38 Characteristics and income taxation of business entities
Sarah and Mike are considering starting a business together. They want to limit their personal liability and avoid double taxation. Which entity would be the best option for them?
A) Partnership
B) C Corporation
C) S Corporation
D) LLC
LLC would be the best option for Sarah and Mike, as it provides limited liability protection and avoids double taxation.
E.38 Characteristics and income taxation of business entities
A C Corporation has $100,000 in taxable income. What is the corporate tax rate for this amount?
A) 10%
B) 21%
C) 24%
D) 35%
The corporate tax rate for taxable income of $100,000 is 21%.
E.38 Characteristics and income taxation of business entities
A sole proprietorship has $80,000 in net income. What is the self-employment tax rate for this amount?
A) 10.4%
B) 12.4%
C) 15.3%
D) 20%
The self-employment tax rate for net income of $80,000 is 15.3%.
E.38 Characteristics and income taxation of business entities
A partnership has $120,000 in net income. How much is each partner’s share of the income if there are three partners with an equal ownership stake?
A) $30,000
B) $40,000
C) $80,000
D) $120,000
Each partner’s share of the income would be $40,000.
E.38 Characteristics and income taxation of business entities
«fix»An S Corporation has $150,000 in taxable income. How much is the total tax liability for the corporation?
A) $31,500
B) $36,000
C) $43,500
D) $45,000
The total tax liability for the S Corporation would be $31,500.
E.38 Characteristics and income taxation of business entities
«FIX»A C Corporation declares a dividend of $50,000 to its shareholders. How much is the tax liability for the shareholders if they are in the 24% tax bracket?
A) $6,000
B) $8,000
C) $12,000
D) $15,000
The tax liability for the shareholders would be $8,000 (24% of $50,000).
E.38 Characteristics and income taxation of business entities
