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

question 33

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• A) Congress repealed the limited liability protection of S corporations and limited them to companies with earnings of less than $3 million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:

Net Investment

The total amount spent on new capital assets minus the depreciation on existing assets.

Capital Stock

The total amount of physical and financial assets owned by a company or country, including machinery, buildings, and investments.

Inventory Investment

Investment in stockpile that companies hold to manage production and sales flow, impacting the overall business operations and financial health.

Limited Partnership

A Limited Partnership is a form of partnership in which some partners contribute capital and enjoy a share of the profit but are not liable for the debts of the partnership beyond the amount they contributed.