Justin\'s firm has been a corporation since its inception and is now an S corpor
ID: 2649719 • Letter: J
Question
Justin's firm has been a corporation since its inception and is now an S corporation. He was excited about becoming an S corporation until he found out he is taxed just like an individual.
On the basis of the above scenario, answer the following questions:
Is it correct that Justin will be taxed like an individual now? Why or why not?
Justin says he can raise more capital as an S corporation? Is he correct? Why or why not?
Justin believes the management of an S corporation is structured just like that of a corporation. Is he correct? Why or why not?
Justin wants to go back to being a corporation. Can he do so? Why or why not?
If Justin wishes to change his status, must all of the shareholders agree? Why or why not?
An S corporation is similar to a C corporation. However, it cannot issue common stock.
Discuss why it is so. Justify your response with the help of reasoning and examples.
Roger is one of 75 members in Justin's S corporation. He is aware that current regulations allow up to 100 members. He believes all 75 members must agree on any new members.
Is he correct? Why or why not?
Current regulations governing S corporation do not allow foreigners to be shareholders. Given the global markets, Justin feels this regulation should be changed.
Is it necessary that the regulation should be changed? Why or why not?
Do foreign owners of S corporation weaken or strengthen U.S. corporations?
Does simply filing an S corporation tax return make the business an S corporation? Analyze and explain how the election of S corporation is made.
Manufacturing firms should not organize as S corporation. Why or why not?
Explanation / Answer
1. Yes S corporation should be taxed as an individual because in S corporation the benfits are being transferred to the shareholders & they are taxed accordingly. Under the proprietorship the business and individual are the same things.
2. He cannot raise money in S corporation as S corporations are not ideal for raising money as this is one of the requirement of S corporation.
3. As the management of the S corporations are same as the management of C corporation . It limits the liability of the shareholders
4. No he cannot reconvert S Corporation into C corporation by revoking the election at any time because this is the requirement of the statutes.
5. If he wants to convert the status of S corporation, all the shareholders must agree as it it is a corpoation of the shareholders who contributes to the corporation.
6. No, simply filing of return of S corporation doesnt make it a S corporation. It has to comply with all the requirement of the statutes like like no of shareholders, domestic corporation etc.
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