[Tutoring Concerns] André and Sasha Want to Go into Business

question 30

Multiple Choice

[Tutoring Concerns] André and Sasha want to go into business together and plan on offering a tutoring service to high school and college students. André proposes that they share control of the business and split profits equally and not bother with a written agreement. Sasha, however, is concerned about being able to pay their debts, since they will have to rent tutoring space, and purchase computers and supplies. She is also concerned about parents and students who may sue if their test scores do not improve. She tells André that she just bought a new boat and car, and that she does not want her assets to be in jeopardy. She tells André that they should form a corporation to shield their personal assets. André, however, tells Sasha that their personal assets are not in danger with his proposal because they are a business and that, furthermore, forming a corporation would result in a tax being imposed twice.
-Which of the following is true regarding André's assertion regarding taxes?

• A) André is correct insofar as the corporation would be required to pay taxes on its profits, and the shareholders would also be required to pay taxes on dividends.
• B) André is incorrect because all businesses are taxed in the same manner.
• C) André is incorrect but only because the law involving taxation of corporations does not apply until there are at least 10 shareholders.
• D) André is incorrect but only because the law involving taxation of corporations does not apply until there are at least 75 shareholders.
• E) André is correct but only because his proposal does not involve a writing and the filing of paperwork with the secretary of their state.

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Definitions:

Important Decisions

Critical choices or judgments made in personal or professional contexts that significantly influence outcomes.

Authorization

The process of giving someone the right or permission to do something, often within a specific context or system.

Participating

Involvement in a group activity or effort, contributing towards reaching a common goal.

Decision-Making Process

A systematic approach to making choices among various alternatives, often involving steps such as identifying problems, evaluating options, and selecting strategies.