Question

Powerful people use corporations to avoid taxes and liability. Society would be better off without corporations.

“Provide a personal experience that you have had or have read about with that issue.”

Answer 1

Answer: Corporation- It is a group of people who work together for a common goal. It is a separate legal entity, means its owners are separate from the company, shareholders of the corporation are not personally liable for any liability or obligation of the company. People choose corporation so as to avoid the liability, they do not want to be personal liable for any debt of the company.

Advantage of corporation- Are as following:

• Separate legal entity, no personal liability.
• Corporation can raise funds by selling shares in the public.
• Some corporation can elect as S corporation which exempts them from federal income tax.
• C corporation can be later converted into S corporation

Taxation benefit- Some corporations may choose to be S corporation. S corporations are not subject to double taxation. In S corporation, income is not taxed twice. Owners can report their share of profit and loss on their individual tax returns. Shareholders do not have to pay self-employment tax, profits that are distributed to the shareholders, are taxed at personal level not at corporation level.

There is tax filing requirement, once in a year in S corporation while in C corporation, it is quarterly.