12Law Arrow 12Law Arrow  Easy Questions  
12Law Arrow 12Law Arrow Instant Legal Documents
 
 
FINANCIAL & MARITAL

Cohabitation Agreement coming soon!
Separation Agreement coming soon!
No-Fault Divorce coming soon!
Bankruptcy coming soon!
 
 

Pros and Cons of Taxation as a Corporation in Zip Code 75803

Pros and Cons of Taxation as a Corporation in Zip Code 75803


Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do.
 
- Steve Jobs


A corporation is the only type of business that pays taxes on profits and is taxed differently from other business structures.

By contrast, sole proprietorships, Partnerships, and limited liability companies (LLCs) are pass through entities that report their business income profits or loss on the personal income tax returns of the owners and are not taxed on business profits like the corporation.

A corporation, as a separate tax entity from the owners, is taxed on all the profits after deducting the business expenses. The money that is kept in the company to cover expenses or expansions (retained earnings) and the profits distributed to the shareholders (dividends) are considered taxable profits.

Tax Deductible Expenses

A corporation can deduct from the taxable profits, its business expenses which is the money that the corporation spend in the legitimate pursuit of the business. The corporation can also deduct from the taxable profits all the salaries and bonuses it pays its employees (including the owners) and also the cost related to medical and retirement plans. Start-up costs, operating expenses, cost of goods sold and product advertising expenditures are also deductible expenses.

Corporate Tax Payments

IRS Form 1120 will be filed by the corporation when paying the corporate income taxes on any profits earned by the corporation. Quarterly payments can be done during the months of April, June, September, and January.

Shareholder Tax Payments

If the owner of the corporation works within the corporation, they are required to pay their own individual income taxes just like regular employees. The salaries and bonuses are considered deductible business expenses so the corporation does not pay taxes on them.

Tax on Dividends

Dividends that the corporation distributes to their shareholders are not tax deductible so they will be reported and paid on their personal income tax aside. And, the corporation is also required to pay the tax on the earnings that fund this dividend. This means the dividends are taxed twice. In smaller corporations, the owners work for the corporation as employees. The corporation pays them in the form of salaries and bonuses which are tax-deductible, thus saving them from taxable dividends. Debt payments are tax deductible, so they are a more tax advantaged source of capital.

S Corporation Taxes

S corporation refers to a corporation that elected to pay taxes like that of a Partnership or limited liability company. The corporate profit or losses of the business are passed through to the owners and reported on their own personal income tax returns, similar to LLCs.

Benefits of a Separate Corporate Income Tax

With double taxation and the extra time and effort in filing both corporate and personal taxes, it begs the question why anyone would choose the corporate structure. There are benefits that can be derived out of having a separate level of taxation. This is a complicated area and the benefits may vary depending on the individual situation.

• Manage to a lower tax rate. Owners can split profit and loss with the business for a lower overall tax rate. By managing how much of the corporations' earning are paid out in dividends to the owners, vs. kept on the corporate books as retained earnings, owners can optimize their combined tax rates. The corporate income tax rate of 15 to 25 percent on profits up to $75,000 is lower than most owners' marginal tax rates on the same amount. This is the reason why it would save money by keeping profits within the company.There is a limitation, however, with the amount of money that can be kept in the corporation which can only amount up to $250,000 without tax penalties.

• Fringe Benefits. Another advantage of forming a corporation where tax benefit is concerned is that the company can deduct the full cost of fringe benefits given to the employees; including the owners and they are not taxed on these benefits.

• Raising capital. Corporations can go public and sell stock. For that reason, venture capital companies prefer to work with corporations rather than with LLCs. S corporations, like LLCs, don't suffer from double taxation. C corporations may face double taxation, but they can have incentive stock option plans.

 
Personalize & Print a Free TX Last Will Create This Document
Page 1
Page 2
Page 3
Page 4
Page 5
Page 6
Page 7
Page 8
Page 9
Page 10
 
Personalize & Print a Free TX Living Will Create This Document
Page 1
Page 2
Page 3
Page 4
Page 5
Page 6
Page 7
Page 8
Related Legal Services near Zip Code 75803
Andritsos George P
3116 Montana Ave
El Paso, TX 79903
(915) 566-9995
Attorneys, Legal Service Plans
Daley Michael J
1801 Col Rowe Blvd
McAllen, TX 78503
(956) 661-9992
General Practice Attorneys, Attorneys, Legal Service Plans
Howard Tagg
5620 Old Bullard Rd Ste. 105
Tyler, TX 75703
(903) 581-9961
Attorneys,  Credit & Debt Counseling,  Business Bankruptcy Law Attorneys,  Real Estate Buyer Brokers
Jim Morrison
2001 Beach St Suite 504
Fort Worth, TX 76103
(817) 535-9900
Bankruptcy Law Attorneys
C. Alfred Mackenzie
P.O. Box 2003
Waco, TX 76703
(254) 848-9800
Graham David-
4152 McKnight Rd
Texarkana, TX 75503
(903) 223-9797
Attorneys, Legal Service Plans
Monteros Roland
609 N Laurel St
El Paso, TX 79903
(915) 577-9756
General Practice Attorneys, Attorneys
Harrell William B
10 Oak Hill Pl
Texarkana, TX 75503
(903) 792-9733
General Practice Attorneys, Attorneys
Wood Wendy
404 E 27th St
Bryan, TX 77803
(979) 779-9663
General Practice Attorneys, Attorneys, Family Law Attorneys
Mahoney Law Office
4915 Holly Ave
Pasadena, TX 77503
(281) 998-9450
Attorneys, Family Law Attorneys, Divorce Attorneys, General Practice Attorneys, Legal Service Plans
Carter, W David - Mercy Carter & Tidwell
1724 Galleria Oaks Dr
Texarkana, TX 75503
(903) 794-9419
Mediation Services,  Attorneys,  Arbitration Services,  General Practice Attorneys,  Legal Service P
Coats Rose
1717 W 6th St
Austin, TX 78703
(512) 469-9408
Attorneys,  Legal Service Plans,  Labor & Employment Law Attorneys,  Real Estate Attorneys,  Insuran
Mahlab Vivian
1911 McCall Rd
Austin, TX 78703
(512) 477-9400
Attorneys, General Practice Attorneys
Howard B D Jr
777 S R L Thornton Fwy
Dallas, TX 75203
(214) 943-9394
General Practice Attorneys, Legal Service Plans, Attorneys
West John D
2905 Toccoa St
Beaumont, TX 77703
(409) 924-9378
Attorneys
Cunningham, Ben - Lakeside Mediation Ctr
3825 Lake Austin Blvd
Austin, TX 78703
(512) 477-9300
Arbitration Services,  Attorneys,  Counseling Services,  Mediation Services
State of Texas Attorney General
2311 Canal St
Houston, TX 77003
(713) 802-9293
Attorneys
Crook David
100 Savannah Ave
McAllen, TX 78503
(956) 971-9200
Attorneys, Real Estate Attorneys, Legal Service Plans
Perez Rudy
2025 Montana Ave
El Paso, TX 79903
(915) 532-9176
Attorneys, Legal Service Plans, Family Law Attorneys, Divorce Attorneys, General Practice Attorneys,
Templeton Law Firm
905 S Abe St
San Angelo, TX 76903
(325) 482-9120
Attorneys,  General Practice Attorneys,  Legal Service Plans,  Labor & Employment Law Attorneys,  Bu
Stephen Gustitis Criminal Defense Attorney
218 N Main St
Bryan, TX 77803
(979) 823-9111
Criminal Law Attorneys, Attorneys
Barish Leon J
1409 W 6th St
Austin, TX 78703
(512) 477-9058
General Practice Attorneys, Attorneys
Leslie & Lay Pc
2731A Montana Ave
El Paso, TX 79903
(915) 565-9000
Bankruptcy Law Attorneys, Attorneys
Boyd & Brown PC
1215 Pruitt Pl
Tyler, TX 75703
(903) 526-9000
Personal Injury Law Attorneys, Attorneys, Legal Service Plans
12Law.com   |  NASHVILLE, TN USA   |  CONTACT US