Business Entity Quiz


Want to test your business tax and accounting knowledge? Take the quiz and test not only your knowledge but ours as well.

Have fun and good luck!

 

 

1. What is a “pass-through” entity?

     a. All profits/losses are passed on to the owner’s personal tax return

QuizMan     b. The owner is not subject to self-employment tax.

     c. All of the above

2. Which of the following is/are “pass-through” entity(s)?

     a. C-Corporation

     b. S-elected C-Corporation (S-Corp)

     c. Limited Liability Company (LLC)

     d. S-elected Limited Liability Company (S-LLC)

     e. b,c,d

     f. b & d only

3. Which entity is the easiest to operate due to fewer regulations, documents and mandatory procedures?

     a. C-Corporation

     b. S-Corporation

     c. Limited Liability Company

     d. S & C Corporations and LLC’s all have the same requirements

4.  What is self-employment tax?

     a. A 5.3% tax on net income on businesses with a passive owner.

     b. A 15.3% tax on net income for sole proprietors & LLCs’ for Social Security and Medicare. 

     c. A 15.3% tax on a shareholder’s personal salary in a C-Corp.

     d. A 5.3% tax on a shareholder’s personal salary in an S-Corp.

5.  Vince sells vacuums door-to-door from May until August as a 1099 Sales Rep for Vacuums Inc.  If Vince makes $30,000 in commissions over the summer, how much is Vacuum Inc. required to pay towards the 15.3% tax on his wages for Social Security and Medicare?

     a. $0, They don’t have to pay any of it.

     b. $2,295; Half of the total tax (7.65%).

     c. $4,590; They are required to pay the total tax

     d. 1099 contractors are not subject to Social Security and Medicare taxes 

6.  Bob is a real estate agent in Utah working as a 1099 contractor/sole proprietor for Whoever Homes/Broker Inc.  In 2009, Bob earned $80,000 in commissions.  How much will Bob pay in self-employment tax on his commissions?

     a. $0; 1099 don’t pay self-employment tax.

     b. Under $5,000

     c. Between $5,000-$10,000

     d. Between $10,000-$15,000

     e. Over $15,000 

7.  Bob, from Question #6, sets up an LLC in March 2010 and files IRS form 2553 for tax treatment as an S-Corp.  Bob makes $80,000 in 2010.  As an S-elected LLC he is required to pay FICA taxes on a “fair and reasonable salary.”  If Bob selects a salary of 33.33% of his net income, what is the difference between the self-employment tax he would have paid to the FICA taxes he will now pay?

     a. They are the same

     b. Approx. $1,000

     c. Approx. $5,000

     c. Approx. $7,000 

 See Answers