Question

Which of the following is considered an advantage of an S corporation?

a. The number of shareholders is limited to 100.

b. Only one class of stock may be outstanding.

c. The business may be a foreign corporation.

d. There is pass-through of ordinary loss to the shareholders

e. There are no restrictions on who may be a shareholders

Answer 1

There are number of advantages of doing business as an S Corporation. One of such advantages is pass through of ordinary loss to the shareholders. Thus, option (d) is the correct answer, i.e. there is pass through of ordinary loss to the shareholders and it is an advantage for S Corporation as it allows flow-through taxation. The profits and losses are distributed to the shareholders who are taxed on their personal level after adjust share of profits or losses from S Corporation.

Thus, option (d) is the correct option here.