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Sam is deciding whether he should operate his business as a C corporation or as an S corporation. Due to potential environmental hazard problems, it is imperative that the business have limited liability. Sam is leaning toward the S corporation form because it avoids double taxation. However, he is concerned that he may encounter difficulty several years in the future is he decides to issue some preferred stock to his son as a way of motivating him to remain active in the business.

Sam is deciding whether he should operate his business as a C corporation or as an S corporation. Due to potential environmental hazard problems, it is imperative that the business have limited liability. Sam is leaning toward the S corporation form because it avoids double taxation. However, he is concerned that he may encounter difficulty several years in the future is he decides to issue some preferred stock to his son as a way of motivating him to remain active in the business.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sam is deciding whether he should operate his business as a C corporation or as an S corporation. Due to potential environmental hazard problems, it is imperative that the business have limited liability. Sam is leaning toward the S corporation form because it avoids double taxation. However, he is concerned that he may encounter difficulty several years in the future is he decides to issue some preferred stock to his son as a way of motivating him to remain active in the business.

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