Easy Questions  
Free Legal Documents

Pros and Cons of Taxation as a Corporation in Abbeville, MS

Pros and Cons of Taxation as a Corporation in Abbeville, MS


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. It is taxed differently from other business structures. 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.

 
Edit, Download, & Print a Free
Mississippi Last Will
Page 1
Page 2
Page 3
Page 4
Page 5
Page 6
Page 7
Page 8
Page 9
Page 10
 
Edit, Download, & Print a Free
Mississippi Living Will
Page 1
Page 2
Page 3
Page 4
Page 5
Page 6
Page 7
Page 8
 
Edit, Download, & Print a Free
Mississippi Power of Attorney
Page 1
Page 2
Page 3
Page 4
Page 5
Related Legal Services near Abbeville, MS
Clark Wynn E
2510 16th St
Gulfport, MS 39501
(228) 575-9996
Attorneys, Legal Service Plans
J Thomas Ash Attorney
1008 20th Ave
Meridian, MS 39301
(601) 693-9992
Bankruptcy Law Attorneys
Chittom Michael B
200 E Capitol St
Jackson, MS 39201
(601) 968-9986
Attorneys, Legal Service Plans
Steven D Boon Law Firm
405 Tombigbee St
Jackson, MS 39201
(601) 960-9966
General Practice Attorneys, Attorneys
Ash Law Firm, P
1008 20th Ave
Meridian, MS 39301
(601) 693-9951
Attorneys, Bankruptcy Law Attorneys, General Practice Attorneys
Lindsey A Boyd Law Firm P
401 E Capitol St # 300
Jackson, MS 39201
(601) 960-9949
General Practice Attorneys, Attorneys, Legal Service Plans
Moore Law Office
1155 S Dr Martin Luther King Jr Blvd
Grenada, MS 38901
(662) 227-9941
Attorneys, General Practice Attorneys
Johnson James D
1507 Hardy St # 105
Hattiesburg, MS 39401
(601) 584-9933
General Practice Attorneys, Attorneys, Legal Service Plans
Davis & Davis PLLC
1229 31st Ave
Gulfport, MS 39501
(228) 864-9922
Automobile Accident Attorneys,  Labor & Employment Law Attorneys,  Employee Benefits & Worker Compen
Shook Law Firm & Dispute Rsltn
610 Adeline St
Hattiesburg, MS 39401
(601) 554-9919
Attorneys, General Practice Attorneys, Legal Service Plans
Signs Jennifer W
1310 25th Ave
Gulfport, MS 39501
(228) 864-9900
Attorneys, Legal Service Plans
Stone Ben H
1310 25th Ave
Gulfport, MS 39501
(228) 864-9900
Attorneys
Wilder H Rodger
1310 25th Ave
Gulfport, MS 39501
(228) 864-9900
Attorneys, Legal Service Plans
Wyly Terese T
1310 25th Ave
Gulfport, MS 39501
(228) 864-9900
Attorneys
Ford Tim
188 E Capitol St # 1400
Jackson, MS 39201
(601) 961-9900
Attorneys
Andress Scott E
188 E Capitol St # 1400
Jackson, MS 39201
(601) 961-9900
Attorneys
Cox Ricky J
1310 25th Ave
Gulfport, MS 39501
(228) 864-9900
General Practice Attorneys, Attorneys
Crawford Todd G
1310 25th Ave
Gulfport, MS 39501
(228) 864-9900
Attorneys, Legal Service Plans
Anderson Tom Attorney
1310 25th Ave
Gulfport, MS 39501
(228) 864-9900
Attorneys
Baca Gerald Atty
1310 25th Ave
Gulfport, MS 39501
(228) 864-9900
Attorneys
Bailey Ann
1310 25th Ave
Gulfport, MS 39501
(228) 864-9900
Attorneys, Legal Service Plans
Carron Chris
1310 25th Ave
Gulfport, MS 39501
(228) 864-9900
Attorneys, Legal Service Plans
Manuel Leo
1310 25th Ave
Gulfport, MS 39501
(228) 864-9900
Attorneys, Legal Service Plans
Pettis Brant
1310 25th Ave
Gulfport, MS 39501
(228) 864-9900
Attorneys, Legal Service Plans
12Law.com   |  NASHVILLE, TN USA   |  CONTACT US