The S Corporation Is Likely to Be Less Popular in the Future

question 325

Multiple Choice

The S corporation is likely to be less popular in the future because:

• A)Congress repealed the limited liability protection of S corporations and limited them to companies with earnings of less than $3 million per year.
• B)Limited liability companies,which do not have the restrictive eligibility requirements of S corporations and offer greater flexibility in the choice of tax treatment,are now legal in all 50 states.
• C)Many states significantly increased the annual fee that S corporations must pay to maintain their tax status,thus eliminating the financial advantages of this form of ownership.
• D)S corporations have been made illegal in several states as a reaction to widespread abuse of the special benefits available to this type of business.

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Definitions:

Conveyance

The legal process of transferring property from one owner to another.

Legal Capacity

Refers to the ability of an individual or entity to enter into legally binding contracts, recognizing their rights and responsibilities.

Testamentary Trust

A trust that is created by a will and comes into effect upon the death of the person who created the will, distributing assets according to the will's provisions.

Inter Vivos Trust

A trust created during the lifetime of the grantor, allowing for the management and distribution of assets before death.