Easy Questions  
Free Legal Documents

Pros and Cons of Taxation as a Corporation in Atlas, MI

Pros and Cons of Taxation as a Corporation in Atlas, MI


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 MI 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 MI 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 Atlas, MI
Total Attorneys - Bankruptcy
PO Box 271785
Detroit, MI 48211
(313) 335-9527
Bankruptcy Law Attorneys,  Attorneys,  Banking & Mortgage Law Attorneys,  Bankruptcy Services,  Lega
Cint Tine
7850 Haggerty Rd
Belleville, MI 48111
(734) 957-9091
General Practice Attorneys
Mcclure Richard P
122 South St
Belleville, MI 48111
(734) 697-8392
Attorneys
Canjar Gary J, JD
6810 S Cedar St
Lansing, MI 48911
(517) 694-7710
Attorneys,  Probate Law Attorneys,  Personal Injury Law Attorneys,  Traffic Law Attorneys,  Automobi
Mendez Janet A
3380 Pinetree Rd
Lansing, MI 48911
(517) 394-7500
Attorneys, Business Law Attorneys, Legal Service Plans
Sinas Dramis Brake Baughton & McIntyre
3380 Pine Tree Ln
Lansing, MI 48911
(517) 394-7500
Accident & Property Damage Attorneys,  Attorneys,  Family Law Attorneys,  General Practice Attorneys
Harper, Mark C - Sinas Dramis Brake Boughton
3380 Pinetree Rd
Lansing, MI 48911
(517) 394-7500
Divorce Attorneys,  Attorneys,  Criminal Law Attorneys,  Family Law Attorneys
Goldman, Suliman PLLC
287 Industrial Park Dr
Belleville, MI 48111
(734) 699-7360
Attorneys,  Civil Litigation & Trial Law Attorneys,  Child Custody Attorneys,  Divorce Attorneys,  D
Miller, Barbara Rogalle
321 Main St
Belleville, MI 48111
(734) 697-7177
Attorneys, Family Law Attorneys, Probate Law Attorneys, Legal Service Plans, Child Custody Attorneys
Dua & Associates
7045 S Cedar St
Lansing, MI 48911
(517) 346-7000
Viterna Law
175 2nd St
Belleville, MI 48111
(734) 325-6986
Military & Veterans Law Attorneys, Attorneys
Express Probate of Michigan PLLC
321 Main St
Belleville, MI 48111
(888) 681-6812
Justice Courts,  Probate Law Attorneys,  Elder Law Attorneys,  Attorneys,  Family Law Attorneys,  Wi
Elder Brian K
301 W Midland Rd
Auburn, MI 48611
(989) 662-6151
Estate Planning Attorneys, Attorneys, Wills, Trusts & Estate Planning Attorneys, General Practice At
White Thomas A Attorney-At-Law
35 Main St
Belleville, MI 48111
(734) 697-6010
Attorneys
McKenzie & Talaska PC
108 S Moore St
Bessemer, MI 49911
(906) 663-4771
Attorneys, Criminal Law Attorneys
Korpela & Kauppi
215 S Sophie St
Bessemer, MI 49911
(906) 663-4544
Divorce Attorneys, Family Law Attorneys, Attorneys
Morth Mi Family Law Group
35 Main St
Belleville, MI 48111
(734) 699-3845
Attorneys
Dipietro Thomas
557 Main St
Belleville, MI 48111
(734) 697-3800
Attorneys, Legal Service Plans
Pomann John J
46775 S Interstate 94 Service Dr
Belleville, MI 48111
(734) 699-3611
Attorneys
Jedo Law Firm PLC
6035 Executive Drive, Suite 21
Lansing, MI 48911
(517) 580-3396
Legal Service Plans,  Bankruptcy Law Attorneys,  General Practice Attorneys,  Immigration Law Attorn
Jedo Law PLC
6035 Executive Dr
Lansing, MI 48911
(517) 580-3396
Bankruptcy Law Attorneys
Legal Services of South Central Michigan
3490 Belle Chase Way
Lansing, MI 48911
(517) 394-2985
Attorneys, Legal Service Plans
Total Attorneys - Bankruptcy
PO Box 271802
Bay Shore, MI 49711
(231) 769-0917
Bankruptcy Law Attorneys,  Attorneys,  Banking & Mortgage Law Attorneys,  Bankruptcy Services,  Lega
Taylor David Lee
3100 Pinetree Rd
Lansing, MI 48911
(517) 393-0600
Attorneys, Legal Service Plans
12Law.com   |  NASHVILLE, TN USA   |  CONTACT US