Identify a Disadvantage of Being an S Corporation

question 32

Multiple Choice

Identify a disadvantage of being an S corporation.

• A)Estates can be shareholders.
• B)Losses flow through immediately to the shareholders.
• C)The AMT on corporations is avoided.
• D)Tax-exempt income flows through as excludible to shareholders.
• E)None of the above is a disadvantage of the S election.

---

Definitions:

Internal Growth Rate

The maximum rate at which a company can expand using only internally generated financing without resorting to external financing.

Return On Assets

A financial metric showing the profitability of a company in relation to its overall assets.

Cost Of Goods Sold

The immediate costs associated with producing the goods a company sells, including the price of materials and labor.

Selling And Administrative Expenses

Costs incurred by a company that are not directly linked to the production process, including marketing expenses, salaries of administrative personnel, and office supplies.