Types of business entities

Question 1

What is the advantages of a sole proprietorship?

Answer 1

Availability of retirement plans,Keogh and SEP
Hundred percent of medical insurance premiums deductible by owner
No legal formalities
Conduit of income or losses to owner (file on a schedule C )

Question 2

What is the disadvantages of a sole proprietorship?

Answer 2

Unlimited liability
Business dies with owner
You are the business

Question 3

What are the disadvantages of a partnership?

Answer 3

Unlimited personal liability for acts of the partnership or a partner acting on behalf of his partnership
Partners dissolve upon death
Capital structure depends on resources of partners

Question 4

Who pays self-employment tax what type of business entity?

Answer 4

Sole proprietor and partnership

Question 5

What is a K1 form used for?

Answer 5

To show a taxpayers share of income from a pass-through entity.

Question 6

What is QBI?

Answer 6

Qualified business income from each pass-through business an individual owns.

Question 7

Can losses be carried forward to be deducted against future QBI income?

Answer 7

Yes

Question 8

What is the phase out for QBI?

Answer 8

Single taxpayers making less than $197,300 in joint father’s making less than $394,600 may claim the full 20% deduction

Question 9

What is QBI?

Answer 9

Qualified business income from each pass-through business an individual owns.

Question 10

How much is able to be deducted by an individual who owns a pass thru business?

Answer 10

20% of their QBI

Question 11

What is the phase out for QBI?

Answer 11

Single filers with more than $247,300 or couples making more than 494,600 taxable income are allowed no deduction if it is a personal service firm.

Question 12

What is the ceiling income for the full QBI deduction?

Answer 12

Single filers making less than $197,300 or joint filers making less than $394,600 may claim the full 20% deduction on their pass thru income

Question 13

What is the corporate tax rate in 2025?

Answer 13

21%

Question 14

What are the what are the advantages of a regular C Corp.

Answer 14

Separate tax entity
Sale of stock to an unlimited number of investors
Dividend received reduction 50% rule
Limited liability
Continuity of life

Question 15

What are the what are the disadvantages of a regular C Corp.

Answer 15

Corporate formalities dividends paid after tax
Accumulated earnings beyond certain limits are subject to double taxation

Question 16

It depends received deduction for C corps?

Answer 16

A US corporation investing, another US corporation receives a deduction for dividends received

Question 17

How much is a dividend received deduction?

Answer 17

50% of dividends receive and qualifying corporations may be excluded from income of receipt corporation if the recipient corporation owns 20% or less of distributing corporation

Question 18

How much is the exclusion of the corporation ownership is between 20% and 80%

Answer 18

65%

Question 19

What’s the dividend received deduction if the ownership of the corporation is greater than 80%?

Answer 19

100%

Question 20

What is section 1244 qualified small business stock?

Answer 20

It’s a corporation CRS that was initially capitalized with no more than $1 million. Loss of $100,000 per year in a joint return is considered to be an ordinary rather than a capital loss.

Question 21

How
Our losses used without the 1244?

Answer 21

The individual can only take a $3000 capital loss and carry forward the remaining losses

Question 23

How many S Corp. shareholders can you have?

Answer 23

Limited to 100

Question 24

What kind of stock can an S Corp. issue?

Answer 24

A single class outstanding common stock no preferred

Question 25

Can an S Corp. be an international corporation

Answer 25

No only domestic

Question 26

Who can be a who can be a shareholder in an S Corp?

Answer 26

Individuals states and certain trusts may be shareholders and they must be US citizens are permanent resident aliens

Question 27

What is a PSC?

Answer 27

Personal service corporation

Question 28

If a business is profitable, what kind of business entity should they go into?

Answer 28

C Corp. PSC

Question 29

If a business is not profitable, what kind of entity should they go into?

Answer 29

Sole proprietorship Partnership S Corp. LLC Limited partnership

Question 30

If the business is risk free, what kind of business should they go into?

Answer 30

Sole proprietorship Partnership

Question 31

If the business has risk, what kind of business entity should they go into?

Answer 31

S Corp. LLC Limit

Question 32

Limit lawyers and CPAs will automatically what kind of business entity?

Answer 32

A limited liability partnership LLP

Question 33

For sole proprietorships, taxable income or losses reported on what schedule form

Answer 33

Schedule C

Question 34

What is the interest limit of deductibility if a business owner borrows money for businesses purposes relating to a sole proprietorship

Answer 34

None

Question 35

What is a limited on losses deductible in a partnership?

Answer 35

Losses are deductible up to basis

Question 36

What define basis in a partnership?

Answer 36

Cash contributed by the partner Direct loans made by the partner And loans made to the partnership, not the partner

Question 37

What defines basis in an S Corp.

Answer 37

Cash contributed by the shareholder Direct loans made by the shareholder to the S Corp. 

Question 38

What is not included as basis in an S Corp.

Answer 38

Bank loans are not included in the S Corp. owners basis

Question 39

What is the difference in basis between a partnership and an S Corp?

Answer 39

NS Corp. their basis will be determined up to cash contributed not debt. In a partnership basis will be determined using cash plus partnership debt