Business Finance
ACC 430 Arizona State University Advanced Tax Memorandum

ACC 430

Arizona State University


Question Description

Help me study for my Accounting class. I’m stuck and don’t understand.

Jones and Turner are interested in possibly changing the structure of their business to an S Corporation and would like to know more about this entity. They are excited by the fact that the S Corporation is a “flow through entity” and the fact that they don’t pay income tax.
They also heard that if they pay themselves dividends as S Corporation shareholders, they won’t have to pay any Social Security or Medicare tax (payroll taxes).

Prepare a memorandum for the business owners using a minimum of 800 words explaining the following;

  • What are the requirements for structuring a business as an S Corporation?
  • Discuss at least two advantages to structuring a business as an S Corporation
  • Explain how income from the S Corporation taxed; include in your discussion on taxation of S Corporation income, the forms (including their names and numbers) utilized in reporting income and paying tax to the IRS.
  • Finally, explain to the business owners what the requirement is for corporate officers who work in their own S Corporations.
    • How are Corporate Officers required to be compensated and why?
    • Explain both the ethical and legal issue regarding their suggestion that they be paid in dividends thus eliminating the requirement that they pay Social Security tax.

Student has agreed that all tutoring, explanations, and answers provided by the tutor will be used to help in the learning process and in accordance with Studypool's honor code & terms of service.

Final Answer


Running head: MEMORANDUM





To: Jones and Turner
From: Oliver Curtis
Subject: S Corporation Requirements
We have been advised that you would wish to redefine your business structure to a more
favorable S Corporation structure. Your interests have been closely linked to an S Corporation
because you have finally understood that this basic business structure is commonly referred to as
a flow-through entity. In terms of taxation, an S Corporation structure allows one to forego
income taxation. In this Memorandum, I am going to highlight the critical requirements needed
while structuring your business as an S Corporation, provide you with at least two merits and
demerits, and provide an understanding of hoe income taxation occurs. Finally, I will provide the
IRS form requirements and S Corporation corporate officers' requirements.
To establish your company as an S Corp, there are several simple conditions to be met.
First of all, the company must be an organization domestically or qualify as an organization. This
implies that a limited liability Company (LLC) is eligible to be established as an S Corp.
Therefore your company is not allowed to have over 100 shareholders. According to Reynolds
(2017), these shareholders must be entities, people, or exempted firms. They must not be
corporations, associations, or non-resident individuals. Yo...

JesseCraig (17924)
Rice University

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