When a Business Is Operated as an S Corporation, a Disadvantage

question 39

True/False

When a business is operated as an S corporation, a disadvantage is that the shareholder must pay the tax on his or her share of the S corporation's income even though the S corporation did not distribute the income to the shareholder.

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Definitions:

General Partnership

A business structure where two or more individuals own and operate a business together, sharing profits and liabilities equally or according to their agreement.

Partnership Agreement

A legal document that outlines the rights, responsibilities, and profit-sharing among business partners.

Partnership Debts

Liabilities or financial obligations incurred by a partnership in the course of its business activities.

Limited Liability

This refers to a business structure where the owners' personal assets are protected from company debts and liabilities.