Question

Carol and her friends are creating a new company that ships monthly subscription boxes filled with beauty products to customers. Carol has multiple partners and she wants to avoid both double taxation and personal liability at the same time. In addition, she wants to pay the partners based on their company ownership percentage. Carol can accomplish her goals by forming what type of business entity?

- An S corporation.- A partnership.- A C corporation.

Answer 1

An S corporation.

Step-by-step explanation:

The S corporation was formed by Congress, for use by small business owners, offering the best characteristics of both a C corporation and a partnership.

It has become the most popular business entity type in recent years. Numerous studies indicate lower overall taxes are paid when an S corporation is utilized.

Common Characteristics of S and C Corps:

-Same liability protection

-Separate legal entities

-The owners are shareholders

-Long standing case law

-Easy transfer of ownership

-Broader range of deductible expenses