Tutoring Concerns.Wally and Sally want to go into business together and plan on offering a tutoring service to high school and college students.Wally proposes that they share control of the business and split profits equally and not bother with a written agreement.Sally,however,is concerned about being able to pay their debts because they will have to rent tutoring space and purchase computers and supplies.She is also concerned about parents and students who may sue if the students' test scores do not improve.She tells Wally that she just bought a new boat and car,and that she does not want her assets to be in jeopardy.She tells Wally that they should form a corporation to shield their personal assets.Wally,however,says their personal assets are not in danger with his proposal because they are a business and that,furthermore,forming a corporation would likely result in double taxation.What type of arrangement,if any,would avoid double taxation for the Wally and Sally's endeavor?
A)An S corporation
B)A limited liability company
C)A corporation
D)An S corporation,a limited liability company,or a corporation
E)An S corporation or a limited liability company,but not a corporation

Question

Quizplus · Accepted Answer

An S corporation is a business organization formed under federal tax law that is considered a corporation yet is taxed like a partnership as long as it follows certain regulations.Additionally,a limited liability company may combine the tax advantages and management flexibility of a partnership with the limited liability of a corporation.