Question

S corporations, in theory, blend the best features of partnerships and corporations.

Please respond to all of the following prompts:

Why elect to form an S corporation over a C corporation?

Will the ownership and/or type of business make a difference on the decision?

Can an S corporation convert to a C corporation?

If it were permitted, why would such a conversion be done, and when would be an appropriate time?

URGENT: NEED ANSWER ASAP

PLEASE RESPOND WITH COPY AND PASTE, NOT ATTACHMENT USE ORIGINAL CONTENT NOT USED BEFORE ON CHEGG

PLEASE ANSWER THROUGHLY TO ALL ANSWER TO BEST ABILITES ORIGINAL SOURCE NEVER USED BEFORE!!!

Answer 1

S Corporation is beneficial with terms to taxation as compared to C corporation. Both are corporations having separate legal identity with limited liability, the only difference being that S corp has a special tax status with IRS. There is a tax advantage with S corp. Like partnerships, there is no tax paid at the corporate level, rather the profits of the S corp entities ar epassed through to the company owners and they are taxed at a personal level. For this a S corp needs to file Form 2553 with the IRS. However, unlike S corp, C corp is taxed at the corporate level. Also company owners may be subject to double taxes if the income is distributed as dividends.

No, the ownership or the type of business will not make any difference on the decision as the difference between the S and C corp is entirely the tax difference.

Yes, S corporation can convert to a C corporation by termination by the IRS or by revoking the S status voluntarily.

Normally a business converts from C to S corp but in certain cases, the S corp may be converted to C corp if the business does not meet the requirements laid down by IRS for an S corp. Another reason for the conversion is to accumulate income without the retained income of the shareholders being taxed. The appropriate time is when the company is earnings profits and retaining the most of it for company growth and development.