Question

The suggested tax advantages of “S” Corporations are tax deductible expenses, limited liability protection, and easy transfer of ownership, credibility, self-employment tax savings and pass-through taxation. Select two of the advantages and explain how the identified advantages are more beneficial in an S Corporation than other forms of business

Answer 1

Two advantages are-

1. Hieghtened credibility.

2. Cash method of accounting.

Hieghtened credibility-

S corporation may help a new business establish credibility with potential customers, partners because they see the owners have made a formal commitment to their business.

Cash method of accounting-

Corporations must use the accrual method of accounting unless they are considered to be small corporations.S corporations, however, usually don't have to use the accrual method unless they have inventory.