Utah General Contractors - Business and Law Practice Exam

If a corporation opts to be taxed as a partnership, what designation does it receive?

1. C Corporation

2. S Corporation

3. Limited Liability Company

4. General Partnership

The correct answer is: S Corporation

When a corporation opts to be taxed as a partnership, it typically makes an election under Subchapter S of the Internal Revenue Code, which allows it to be taxed as an S Corporation. This designation is specifically structured to provide certain tax benefits that are available to partnerships, such as pass-through taxation, where income is taxed at the individual shareholders’ tax rates rather than at the corporate level. An S Corporation has limitations on the number and type of shareholders it can have, but it generally allows owners to avoid double taxation on income, which is a key advantage sought by many business owners. By electing to be treated as an S Corporation, the organization can keep its corporate structure and the associated liability protections while enjoying the tax treatment akin to that of a partnership. The other options do not align with the statement about treating a corporation as a partnership for tax purposes. A C Corporation is the standard corporation structure subject to corporate income taxation without the benefits of pass-through taxation. A Limited Liability Company (LLC) is a separate business entity that can also choose its tax treatment but is distinct from corporate structures, and a General Partnership does not involve the same formal registration and structure as a corporation. Hence, the designation received as a result of electing to be taxed