Question

Please answer matching question

MATCHING 21-25 A-E 28. A legal taking of your assets by the government 29. Corporation required to pay income tax 30. Most probable business status of a ten year old operating a lemonade stand 31. Entity not having any corporate tax filing requirements 32. Ordinary and necessary A. Disregarded entity Limited Liability Company B. Sole proprietorship C. Definition of a TAX D. Test for deductibility of business expenses E. "C" Corporation ESSAY QUESTION - In 25 words or less Give two advantages, income tax or otherwise, of operating as a LIMITED LIABILITY COMPANY over operating as a “C” CORPORATION.

Answer 1

28 - C

A legal taking of your assets by the Government - Definition of Tax

Tax is a contribution made by individuals and Corporations to the common pool of Government without expecting any direct benefit from it. However the people and corporations in the country enjoy the common services from the Government indirectly. So Tax is a legal taking of your assets (portion of hard earned money) by the Government for the common good of the nation.

29 - E

Corporation required to pay income tax - "C" Corporation

As per US tax laws, A C Corporation is an entity which is taxed separately from its owners. Hence the C Corporation is liable to pay taxes.

30 - B

Most probable Business Status of a ten year old operating a lemonade stand - Sole Proprietorship

Ten year old could operate a sole proprietor business running lemonade stand.

31 - A

Entity not having any corporate tax filing requirements - Disregarded entity Limited Liability Company

Disregarded LLC is a single member LLC which is disregarded as a corporation or as a separate legal entity in the eyes of tax laws. Hence it doesn't required to comply with corporate tax filing requirements.

32 - D

Ordinary and Necessary - Test for deductibility of business expenses

Only those expenses which are ordinary and necessary for the respective business could be allowed as an expense and deducted from the profit of a business. Any expense deducted otherwise would be disallowed and added back to the profit and would accordingly taxed under the appropriate tax laws.