Business Forms: The Case of Bill and Darlene
Bill and Darlene plan to go into business together. They anticipate losses in the first two or three years, which they would like to use to offset income from other sources. They also are concerned about exposing their personal assets to business liabilities. Write a short paper advising Bill and Darlene what business form you would recommend for them as they start up their business. State any assumptions you make.

Bill and Darlene’s concerns; as they consider the type of business form to assume are very legitimate and are very important things to consider. Entrepreneurs have certain goals when choosing a structure for their business these includes protecting their personal assets from business claims that is; limited liability and having business profits taxed on their individual tax returns.
The recommendation for Bill and Darlene would be an S corporation. An S corporation is a regular corporation that has elected S corporation tax status. Forming an S corporation allows for the limited liability of a corporate shareholder; however income taxes are paid based on a structure of a sole proprietor or a partnership. In an S corporation, all business profits pass through to the owners, who report them on their personal tax returns as with a sole proprietorships, partnerships, and LLCs. An S corporation is not required to pay income tax but an S corporation with more than one owner an informational tax return must be filed as is the case with a partnership or LLC, to report each shareholder's portion of the corporate income. Most states including Connecticut follow the federal pattern when taxing S corporations. They don't impose a corporate tax, but choose instead to tax the business's profits on the shareholders' personal tax return (Pope, T. 2014. P. 27; nolo.com).
The formation of an S corporation has its