Question

Which of the following can be an advantage of a limited liability company over an S corporation? a. Double taxation of profits is avoided. b. Owners receive limited liability protection. c. Appreciated property can be distributed tax-free to an owner. d. Incentive stock options can be used to compensate owners.

Answer 1

Answer:

The correct answer is letter "C": Appreciated property can be distributed tax-free to an owner.

Explanation:

A Limited Liability Company (LLC) is a type of organization where the owners are not personally liable for the company's responsibilities. On the other hand, an S Corporation is constituted for 100 shareholders or less who are jointly liable for the business' responsibilities.

An advantage of an LLC over an S Corporation could lay on the fact that the LLC can distribute appreciated property to its shareholders tax-free just like if an asset would have been sold.

Answer 2

Answer:

C

Explanation:

Appreciated property can be distributed tax-free to an owner. 

An S corporation cannot distribute appreciated property to its shareholders without gain. A limited liability company (LLC) is taxed like a partnership (an LLC properly structured and with two or more owners is taxed like a limited partnership with no general partners), a limited liability company can distribute appreciated property to its owners tax-free