List and Discuss Five Advantages and Five Disadvantages of Electing

question 13

Essay

List and discuss five advantages and five disadvantages of electing to be taxed as an S corporation over a C corporation or a partnership.

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Definitions:

Fixed Costs

Costs that do not vary with production or sales levels, including rent, insurance, and salaries, which remain constant regardless of business activity levels.

Operating Income

The profit realized from a business's operations, calculated by subtracting operating expenses from gross profit.

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and insurance premiums.

Flexible Budget

A budget that adjusts or varies with changes in the volume of activity, providing a more useful tool for performance evaluation.