Easy Questions  
Free Legal Documents

Pros and Cons of Taxation as a Corporation in Abbyville, KS

Pros and Cons of Taxation as a Corporation in Abbyville, KS


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.

 
Personalize & Print a Free KS Last Will Download 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 KS Living Will Download this Document
Page 1
Page 2
Page 3
Page 4
Page 5
Page 6
Page 7
Page 8
Related Legal Services near Abbyville, KS
Total Attorneys - Divorce
273905 SW Wood View Dr
Topeka, KS 66610
(785) 201-9922
Divorce Attorneys,  Attorneys,  Family Law Attorneys,  Legal Service Plans
Collaborative Divorce Ks City
8686 College Blvd
Overland Park, KS 66210
(913) 451-9876
Attorneys
Gladstone Lois A
8005 W 115th St
Overland Park, KS 66210
(913) 345-9848
Attorneys, Small Business Attorneys, Labor & Employment Law Attorneys
Weaver Tracy
7500 College Blvd
Overland Park, KS 66210
(913) 906-9830
Attorneys, Legal Service Plans
Campbell Todd
7500 College Blvd # 900
Overland Park, KS 66210
(913) 906-9820
Attorneys, Legal Service Plans
Renkemeyer Troy
7500 College Blvd # 900
Overland Park, KS 66210
(913) 906-9810
Attorneys, Legal Service Plans
Rajala Eric C
11900 College Blvd Ste 341
Overland Park, KS 66210
(913) 339-9806
Attorneys, General Practice Attorneys, Legal Service Plans
RCW Law
10975 Benson St # 570
Overland Park, KS 66210
(913) 906-9800
Attorneys, Legal Service Plans
Smithyman & Zakoura
7400 W 110th St # 750
Overland Park, KS 66210
(913) 661-9800
Attorneys, General Practice Attorneys
Zakoura James P
7400 W 110th St # 750
Overland Park, KS 66210
(913) 661-9800
Attorneys, Insurance, Legal Service Plans, General Practice Attorneys
Naibert Robert W Atty
7400 W 110th St
Overland Park, KS 66210
(913) 661-9800
Attorneys
Mobile Paralegal Service
11734 Garnett St
Overland Park, KS 66210
(913) 223-9768
Paralegals
R Michael Latimer Law Offices
11011 King St
Overland Park, KS 66210
(913) 661-9700
Attorneys, General Practice Attorneys
Hagen Law Offices
10801 Mastin St # 110
Overland Park, KS 66210
(913) 236-9696
Attorneys, General Practice Attorneys, Legal Service Plans
Norton Hare
9200 Indian Creek Pkwy # 450
Overland Park, KS 66210
(913) 906-9633
Attorneys, General Practice Attorneys
Hare Lindsay A Atty
9200 Indian Creek Pkwy
Overland Park, KS 66210
(913) 906-9633
Attorneys
Allmayer Daniel N
9393 W 110th St # 500
Overland Park, KS 66210
(913) 768-9557
Attorneys
Robert J Valcrum Attorney
10990 Quivira Rd Ste 200
Overland Park, KS 66210
(913) 948-9400
Attorneys
Long Luder & Gordon PA
9401 Indian Creek Pkwy # 800
Overland Park, KS 66210
(913) 491-9300
Attorneys, Legal Service Plans
Telhorst & Associates
11225 College Blvd
Overland Park, KS 66210
(913) 322-9169
Attorneys, Legal Service Plans
Renkemeyer Law Firm
10975 Benson St Suite 570
Overland Park, KS 66210
(855) 792-9076
Tax Attorneys,  Attorneys,  Family Law Attorneys,  Divorce Attorneys,  Legal Service Plans
Hovey Williams LLP
10801 Mastin St Ste.1000 84 Corporate Woods
Overland Park, KS 66210
(913) 647-9050
Attorneys, Patent Agents, Patent, Trademark & Copyright Law Attorneys
Adam Mack - Bankruptcy
3735 SW Wanamaker Rd Suite A
Topeka, KS 66610
(785) 274-9040
Credit & Debt Counseling,  Foreclosure Services,  Financial Services,  Bankruptcy Services,  Bankrup
Oliver & Reichel PA
11020 King St Ste 215
Overland Park, KS 66210
(913) 498-8814
Accident & Property Damage Attorneys,  Personal Injury Law Attorneys,  Attorneys,  Medical Malpracti
12Law.com   |  NASHVILLE, TN USA   |  CONTACT US