Question

N an LLC, profits and losses reported on individual tax returns. In an S corporation, taxes are "passed through." This means income that the owner takes is reported on personal income taxes only.

A. True
B. False

Answer 1

The statement is false because both LLCs and S corporations employ pass-through taxation but have different tax status and reporting requirements.

Step-by-step explanation:

The statement is false. While it's true that both an LLC (Limited Liability Company) and an S corporation offer pass-through taxation, meaning that profits and losses can be reported on the individual tax returns of the owners rather than the company being taxed separately, the distinction lies in how each structure is treated for tax purposes. An LLC is a flexible business structure, which can choose how it's taxed, either as a sole proprietorship/partnership or as a corporation. S corporations, while also providing pass-through taxation, are subject to more strict eligibility requirements and allow the income to pass through to shareholders who report it on their personal tax returns.