While meeting with a CPA, a new business owner finds out that the business is considered a pass-through entity. What does that mean? a)The profits of the business are taxed as income to the owner. b)The profits of the business are taxed as income to the company. c)The owner's personal assets are not at risk even if the business fails. d)The business will only have a few employees.

Answered: While meeting with a CPA, a new…

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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While meeting with a CPA, a new business owner finds out that the business is considered a pass-through entity. What does that mean?

	a)	The profits of the business are taxed as income to the owner.
	b)	The profits of the business are taxed as income to the company.
	c)	The owner's personal assets are not at risk even if the business fails.
	d)	The business will only have a few employees.

Expert Solution

Step 1

A business entity is a set-up for doing business activities and every business has some goal vision and mission. This business entity can be the sole proprietorship entity, partnership firm entity, LLC, corporation, etc. From the point of view of taxation, the tax rate applies to entities on their business structures.

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