Aubrey Has Been Operating His Business as a C Corporation

question 94

Essay

Aubrey has been operating his business as a C corporation for the past 5 years. The corporation pays him a reasonable salary. The profits of the corporation, after paying Federal income tax, are distributed to him each year as a dividend. He is considering electing S status for his corporation in order to avoid double taxation. What factors should he consider assuming after-tax earnings will continue to be distributed to him?

---

Definitions:

Publishing Contract

A legal agreement between an author and a publisher, detailing rights, obligations, and financial terms for publishing a work.

Low Income Housing

Housing units provided at reduced costs to individuals or families with lower income levels, often subsidized by government programs.

Critical Value

In hypothesis testing, the critical value is a point on the test distribution that is compared to the test statistic to decide whether to reject the null hypothesis.

Hypothesis Test

A method of statistical inference used to decide whether a dataset significantly supports a specific hypothesis.