Easy Questions  
Free Legal Documents

Pros and Cons of Taxation as a Corporation in Alledonia, OH

Pros and Cons of Taxation as a Corporation in Alledonia, OH


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 OH 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 OH 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 Alledonia, OH
Alfred D. McCallin, Esq.
116 Cleveland Ave NW # 500
Canton, OH 44702
(330) 453-9999
Probate Law Attorneys, Real Estate Attorneys, Collection Law Attorneys, Estate Planning Attorneys
Pundzak Lynn D
830 Main St # 999
Cincinnati, OH 45202
(513) 564-9999
Corporation & Partnership Law Attorneys, Attorneys, Labor & Employment Law Attorneys
Pundzak Lynn D
830 Main St, Suite 999
Cincinnati, OH 45202
(513) 564-9999
Civil Litigation & Trial Law Attorneys, Discrimination & Civil Rights Law Attorneys, Labor & Employm
Ambrose James T
130 W 2nd St # 999
Dayton, OH 45402
(937) 229-9999
Attorneys,  Attorneys Referral & Information Service,  General Practice Attorneys,  Legal Service Pl
Morello and Bond LTD
116 Cleveland Ave NW
Canton, OH 44702
(330) 454-9960
Legal Service Plans,  Accident & Property Damage Attorneys,  Personal Injury Law Attorneys,  Crimina
Finkelmeier Law Firm
36 E 7th St # 1660
Cincinnati, OH 45202
(513) 621-9921
General Practice Attorneys, Attorneys, Legal Service Plans
Steiden Eric A
830 Main St # 401
Cincinnati, OH 45202
(513) 684-9900
General Practice Attorneys, Attorneys, Legal Service Plans
Osborne Wesley W
2511 Marion Mount Gilead Rd
Marion, OH 43302
(740) 389-9894
Attorneys,  Wills, Trusts & Estate Planning Attorneys,  General Practice Attorneys,  Estate Plannin
Proctor-Donald Beverly
401 Tuscarawas St W
Canton, OH 44702
(330) 580-9880
Attorneys,  Personal Injury Law Attorneys,  Family Law Attorneys,  Divorce Attorneys
L. Patrick Mulligan & Associates L.P.A. Co.
225 West Court Street
Cincinnati, OH 45202
(513) 421-9790
Mon-Fri 9am-5pm, Sat Closed, Sun Closed
L. Patrick Mulligan
28 N Wilkinson St
Dayton, OH 45402
(937) 228-9790
Divorce Attorneys, Attorneys, Criminal Law Attorneys, Divorce Assistance, Family Law Attorneys, Lega
Andreoff Alex & Associates
1 S Limestone St
Springfield, OH 45502
(937) 323-9783
Social Security & Disability Law Attorneys,  Attorneys,  Accident & Property Damage Attorneys,  Empl
Andreoff Alex & Associates
1 S Limestone St Ste 310
Springfield, OH 45502
(937) 323-9783
Attorneys
Davis Jr Myron Y
700 Walnut St # 209
Cincinnati, OH 45202
(513) 241-9773
Attorneys, Legal Service Plans
Schmenk Gerald E
20 N Limestone St
Springfield, OH 45502
(937) 323-9739
General Practice Attorneys, Title Companies, Attorneys
DeGirolamo, Anthony J
116 Cleveland Ave NW
Canton, OH 44702
(330) 588-9700
Bankruptcy Law Attorneys,  Attorneys,  Business Law Attorneys,  Business Bankruptcy Law Attorneys,  
Stone M Blake
25 S Mulberry St
Mansfield, OH 44902
(877) 595-9681
Social Security & Disability Law Attorneys,  Attorneys,  Accident & Property Damage Attorneys,  Pers
Helmick Bertha G
810 Sycamore St # 4
Cincinnati, OH 45202
(513) 651-9666
Family Law Attorneys, Divorce Assistance, Attorneys
Denicola & Co Lpa
36 E 7th St # 2020
Cincinnati, OH 45202
(513) 621-9660
Personal Injury Law Attorneys, Litigation & Tort Attorneys, Attorneys
Foltz Law Offices LLC
122 Central Plz N
Canton, OH 44702
(330) 456-9656
Divorce Attorneys,  Attorneys,  Criminal Law Attorneys,  Family Law Attorneys,  Accident & Property
Gupta Shawn
1324 State Route 125
Amelia, OH 45102
(513) 752-9455
General Practice Attorneys, Attorneys
Young Reverman & Mazzei CO LPA
1014 Vine St #2400
Cincinnati, OH 45202
(513) 770-9444
Adoption Law Attorneys,  DUI & DWI Attorneys,  Social Security & Disability Law Attorneys,  Attorney
Marinakis & Marinakis
605 Sycamore St
Cincinnati, OH 45202
(513) 684-9393
General Practice Attorneys, Attorneys, Legal Service Plans
Hammond John R
4 W Main St
Springfield, OH 45502
(937) 327-9370
DUI & DWI Attorneys,  Attorneys,  Personal Injury Law Attorneys,  Criminal Law Attorneys,  Divorce A
12Law.com   |  NASHVILLE, TN USA   |  CONTACT US