CLA CP (Certified Legal Assistant Certified Paralegal) Exam

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Which of the following is a key characteristic that distinguishes an S Corporation from a C Corporation for federal income tax purposes?

S Corporations provide limited liability to owners, while C Corporations do not. S Corporations are subject to double taxation, while C Corporations have pass-through taxation. S Corporations have restrictions on the number and type of shareholders, while C Corporations generally do not. S Corporations are formed by filing Articles of Organization with the state.

Correct Answer:

S Corporations have restrictions on the number and type of shareholders, while C Corporations generally do not.

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