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In: Finance

If the taxpayer is considering buying a business and the accompanying real estate and wants to...

If the taxpayer is considering buying a business and the accompanying real estate and wants to receive the limited liability of incorporating as a C Corp entity, are there better forms of business to establish and why

Solutions

Expert Solution

Yes there is a better form of business, called S corporation. S corporation is same like C corporation but there are few advantages, given in S corporation, these are as following:

  1. There is not double taxation in S corporation, Income is not taxed twice at corporate level and personal level.
  2. Company's directors, shareholders, officers and employees have limited liability, they are not personally liable for any obligation of the S corporation.
  3. Owners report their profit and loss on their individual tax returns.
  4. There is once a year tax filing required, in C corporation, it is quarterly.
  5. Business continues even after the owners die.
  6. Company can attract the investors by selling share of stock to them.
  7. S corporation provides covered protection and many other investment opportunities.

C corporation can be converted into S corporation. Firstly your business has to be structured as C corporation. After sometimes, you can try to become S corporation if conditions are fulfilled under IRS.


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