Questions: With an S corporation stockholders have the same liability as members of a partnership. the life of the corporation is limited. income is taxed as direct income to stockholders. the number of stockholders is unlimited.

The answer is: income is taxed as direct income to stockholders.

This statement is incorrect. In an S corporation, stockholders have limited liability, similar to a C corporation, meaning they are not personally liable for the debts and liabilities of the corporation beyond their investment in the company. In contrast, members of a partnership typically have unlimited liability, unless it is a limited partnership.

This statement is incorrect. An S corporation, like a C corporation, has a perpetual existence, meaning its life is not limited to the life of its owners or stockholders. It continues to exist until it is legally dissolved.

This statement is correct. An S corporation is a pass-through entity, meaning its income, deductions, and tax credits pass through to the stockholders, who report this income on their personal tax returns. This avoids the double taxation that occurs in C corporations, where income is taxed at both the corporate and individual levels.

This statement is incorrect. An S corporation is limited to 100 stockholders, and all stockholders must be U.S. citizens or residents. This is one of the restrictions that differentiate S corporations from C corporations, which can have an unlimited number of stockholders.