For Which Type of Entity Is an Owner Least Likely

Question

Examlex · Accepted Answer

The Answer is An owner of a C corporation is least likely to have a
wherewithal to pay problem.The shareholder is not taxed on his/her distributive share of entity earnings.Instead, the shareholder would only be taxed on wages if an employee), dividends, or other payments, such as for rent or interest income.In each situation, assuming the transfer is in cash, the owner has funds to pay any tax on the income.
A sole proprietor may have a minor wherewithal to pay issue.A sole proprietor is taxed on the net earnings of the business.If the business uses the accrual method of accounting, and there are significant accounts receivable, it is possible that there is insufficient funds for the owner to pay taxes.
A partner must pay tax on his/her distributive share of partnership income even if none of the earnings or capital is distributed to the owner.This can present a severe wherewithal to pay problem for her.
An S corporation shareholder also must pay tax on his/her distributive share of corporate income.If the distribution is less than the tax on these earnings, the owner has a wherewithal to pay problem.However, unlike a partnership, the S corporation owner who also works for the entity is an employee and is to be paid reasonable wages.These wages also decrease the owner's distributive share of income.The receipt of wages allows the shareholder to pay tax on such income.

For Which Type of Entity Is an Owner Least Likely

Essay

Correct Answer:
Verified

For Which Type of Entity Is an Owner Least Likely

Essay

Correct Answer:VerifiedShow Answer

Correct Answer:
Verified