Agnes Lorenza

2101657202

LE53

Introbus-2

1. Explain what the differentiation of C-Corporation from S-Corporation.

2. Explain the type of Partnership, and explain what advantage and disadvantage of
Partnership.

Answer

1. The differentiation of C-Corporation from S-Corporation.

 Taxation. Taxation is often considered the most significant difference for small
business owners when evaluating S corporations vs. C corporations.
o C corporations. C corps are separately taxable entities. They file a corporate tax
return (Form 1120) and pay taxes at the corporate level. They also face the possibility
of double taxation if corporate income is distributed to business owners as dividends,
which are considered personal income. Tax on corporate income is paid first at the
corporate level and again at the individual level on dividends.
o S corporations. S corps are pass-through tax entities. They file an informational
federal return (Form 1120S), but no income tax is paid at the corporate level. The
profits/losses of the business are instead “passed-through” the business and reported
on the owners’ personal tax returns. Any tax due is paid at the individual level by the
owners.
o Personal Income Taxes. With both types of corporations, personal income tax is due
both on any salary drawn from the corporation and from any dividends received from
the corporation.
 Corporate ownership. C corporations have no restrictions on ownership, but S
corporations do. S corps are restricted to no more than 100 shareholders, and shareholders
must be US citizens/residents. S corporations cannot be owned by C corporations, other S
corporations, LLCs, partnerships or many trusts. Also, S corporations can have only one
class of stock (disregarding voting rights), while C corporations can have multiple classes. C
corporations therefore provide a little more flexibility when starting a business if you plan
to grow, expand the ownership or sell your corporation.

2. Partnership is a type of business in which two or more persons mutualy own and operate
the business and agree to share profits equally or according to profit sharing ratio. It is
similar to sole proprietorship in many ways. There are two main sub-classifications of
partnerships:
a. General Partnership -- All owners share in operating the business and in assuming
liability for the business’s debts.
b. Limited Partnership -- A partnership with one or more general partners and one or
more limited partners.
c. Master Limited Partnership -- A partnership that looks much like a corporation but is
taxed like a partnership and thus avoids the corporate income tax.
 d. Limited Liability Partnership -- Limits partners’ risk of losing their personal assets to
the outcomes of only their own acts and omissions and those of people under their
supervision.

Advantages of partnership:
1. More financial resources
2. Shared management and pooled skills and knowledge
3. Longer survival
4. No special taxes

Disadvantages of partnership:
1. Unlimited liability
2. Division of profits
3. Difficult to terminate
4. Disagreements among partners