Owners of Which of the Following Entity Types Could Potentially

question 72

Multiple Choice

Owners of which of the following entity types could potentially increase their after-tax cash flow from the entity by reducing the compensation they receive in order to increase the amount of business income that flows-through to them from the entity?

• A) Sole-proprietorship.
• B) Entity taxed as a partnership.
• C) S corporation.
• D) "Entity taxed as a partnership" and "S corporation".

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Definitions:

Tax Withholding

The portion of an employee's wages that is not included in their paycheck because it is paid directly to the government as a prepayment of income tax.

Tax Liability

The total amount of tax that individuals or entities are legally obligated to pay to a taxing authority based on their income, property, or other taxable assets.

Married Filing Jointly

A tax filing status for married couples who choose to combine their income and deductions on one tax return.

Single Filing Status

A tax filing status for individuals who are unmarried and do not qualify for other filing statuses.