Which of the following is an advantage of an S Corporation?

An S Corporation has specific tax advantages that distinguish it from other types of corporate structures. One major benefit is that it allows income, losses, deductions, and credits to be passed through directly to shareholders, avoiding the double taxation typically faced by C Corporations. In an S Corporation, shareholders report the income and losses on their personal tax returns, which can result in significant overall tax savings.

The option that mentions "No FICA taxes" highlights a common misunderstanding. While shareholders who actively perform services for the corporation may have to pay FICA taxes on their reasonable salary, corporate profits that are distributed as dividends do not incur FICA taxes. This can provide an incentive for shareholders to take distributions instead of salaries, ultimately reducing their overall tax burden and demonstrating a key restructuring benefit of S Corporations.

In contrast, the other options present characteristics that do not align with S Corporations. The unlimited shareholder count is inaccurate, as S Corporations are limited to 100 shareholders. Corporate tax benefits refer more generally to the nature of businesses and do not specifically highlight the unique advantages S Corporations have in tax treatment. Lastly, the ability to issue preferred stock is a characteristic of C Corporations, as S Corporations can only issue a single class of stock, which