Chang and George, high income taxpayers, are starting a new business that manufactures and sells explosives. They expect the business to sustain $500,000 in losses in its first two years of operation, then gradually generate profits. Given their high income level, the nature of their business, and its projected operating results, what entity form(s) might Chang and George find advantageous, and why? O A. (1) The S corporation, and (2) the limited liability company. With respect to both forms, taxable items reported at the entity level flow through to the separate returns of the entity's owners. In this specific case, the start-up losses generated at the entity level during the first two years of operation would flow through to Chang and George's separate returns. There, each owner could offset a pro rata share of the losses against his or her income. In addition, both an S corporation and a limited liability company afford all of their owners limited liability (unlike the case of a limited partnership, in which at least one general partner incurs unlimited liability). Given the extraordinary risks associated with an explosives business, such a feature would be advantageous. OB. AC corporation because the corporation has the dual advantages of facilitating external financing and limiting the shareholders' legal liability. Given the extraordinary risks associated with an explosives business, such a feature would be advantageous. O C. The limited liability company. In this specific case, the start-up losses generated at the entity level during the first two years of operation would flow through to Chang and George's separate returns. There, each owner could offset a pro rata share of the losses against his or her income. The S corporation is also a flow-through entity, but the limited liability company is more suitable for Chang and George because a limited liability company afford all of their owners limited liability (unlike the case of a S corporation or a limited partnership). Given the extraordinary risks associated with an explosives business, such a feature would be advantageous. O D. A partnership because it entails only one level of taxation at the ownership level. The start-up losses generated at the entity level during the first two years of operation would flow through to Chang and George's separate returns. There, each owner could offset a pro rata share of the losses against his or her income. Chang and George, high income taxpayers, are starting a new business that manufactures and sells explosives. They expect the business to sustain $500,000 in losses in its first two years of operation, then gradually generate profits. Given their high income level, the nature of their business, and its projected operating results, what entity form(s) might Chang and George find advantageous, and why? O A. (1) The S corporation, and (2) the limited liability company. With respect to both forms, taxable items reported at the entity level flow through to the separate returns of the entity's owners. In this specific case, the start-up losses generated at the entity level during the first two years of operation would flow through to Chang and George's separate returns. There, each owner could offset a pro rata share of the losses against his or her income. In addition, both an S corporation and a limited liability company afford all of their owners limited liability (unlike the case of a limited partnership, in which at least one general partner incurs unlimited liability). Given the extraordinary risks associated with an explosives business, such a feature would be advantageous. OB. AC corporation because the corporation has the dual advantages of facilitating external financing and limiting the shareholders' legal liability. Given the extraordinary risks associated with an explosives business, such a feature would be advantageous. O C. The limited liability company. In this specific case, the start-up losses generated at the entity level during the first two years of operation would flow through to Chang and George's separate returns. There, each owner could offset a pro rata share of the losses against his or her income. The S corporation is also a flow-through entity, but the limited liability company is more suitable for Chang and George because a limited liability company afford all of their owners limited liability (unlike the case of a S corporation or a limited partnership). Given the extraordinary risks associated with an explosives business, such a feature would be advantageous. O D. A partnership because it entails only one level of taxation at the ownership level. The start-up losses generated at the entity level during the first two years of operation would flow through to Chang and George's separate returns. There, each owner could offset a pro rata share of the losses against his or her income