Which statement is TRUE?
A) An S corporation and an LLC are identical.
B) An S corporation and an LLC both limit liability.
C) An S corporation and an LLC both avoid double taxation in all cases.
D) An S corporation and an LLC both pay corporate taxes.

Question

Quizplus · Accepted Answer

Both an S corporation and an LLC limit the liability of their owners or shareholders, meaning that personal assets are protected from business debts or lawsuits. While both entities may also have tax advantages, such as avoiding double taxation, this is not always the case and can depend on the specific circumstances of the business. However, the two entities are not identical, as an S corporation must meet certain eligibility requirements and has restrictions on the number and type of shareholders, while an LLC offers more flexibility in its ownership structure. Additionally, while both entities may be subject to taxes, an LLC is typically taxed as a partnership, while an S corporation is taxed under special rules that allow it to avoid federal income taxes.

Which Statement Is TRUE