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 01742

Pros and Cons of Taxation as a Corporation in Zip Code 01742


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 MA 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 MA 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 01742
Spero Stanley
336 Baker Ave # 10
Concord, MA 01742
(978) 318-9292
Attorneys
Fallon Jas F Jr
46 Main St
Concord, MA 01742
(781) 259-8686
Attorneys
Marino Michael V
48 Junction Square Dr
Concord, MA 01742
(978) 369-8600
Attorneys
Lee Virginia
747 Main St # 209
Concord, MA 01742
(978) 369-8477
Attorneys,  Accident & Property Damage Attorneys,  General Practice Attorneys,  Legal Service Plans
Wesel Melissa
40 Flint Rd
Concord, MA 01742
(978) 369-7526
General Practice Attorneys, Attorneys, Legal Service Plans
Mee John
12 Damonmill Sq
Concord, MA 01742
(978) 371-7100
General Practice Attorneys, Attorneys
John F. Mee
9 Damonmill Square, Suite 4A4
Concord, MA 01742
(978) 371-7100
General Practice Attorneys, Attorneys
Kathleen Foley
53 Main St
Concord, MA 01742
(978) 369-6468
Attorneys,  Family Law Attorneys,  Divorce Attorneys,  Arbitration Services,  Arbitration & Mediatio
Grantham Law Firm
81 Middle St.
Concord, MA 01742
(978) 341-5044
Attorneys,  Criminal Law Attorneys,  DUI & DWI Attorneys,  Bankruptcy Law Attorneys,  Traffic Law At
Bander David
66 Commonwealth Ave # 2
Concord, MA 01742
(617) 371-4242
General Practice Attorneys, Attorneys, Legal Service Plans
Susan Stamps Law Offices
9 Damonmill Sq # 5D
Concord, MA 01742
(978) 371-3131
Attorneys, General Practice Attorneys, Legal Service Plans
Mcwalter Barron Boisvert PC
30 Monument Sq # 145
Concord, MA 01742
(978) 369-2252
Estate Planning Attorneys, Attorneys, Family Law Attorneys, Divorce Attorneys, Wills, Trusts & Estat
Blatman Bettye Ann
9 Damonmill Sq # 4A4
Concord, MA 01742
(978) 371-2226
Attorneys, Legal Service Plans
David Burgess & Assoc
37 Main St
Concord, MA 01742
(978) 371-1900
Attorneys,  Legal Service Plans,  Criminal Law Attorneys,  Family Law Attorneys,  Divorce Attorneys,
Smith James A
124 Hill St
Concord, MA 01742
(978) 369-1471
Attorneys
Whittemore Edwin P
45 Walden St
Concord, MA 01742
(978) 369-1118
Attorneys, General Practice Attorneys
Johnson Peter R
801 Main St # 14
Concord, MA 01742
(978) 369-0960
Estate Planning Attorneys,  Attorneys,  General Practice Attorneys,  Legal Service Plans
McCarthy Thomas F Law Offices
97 Lowell Rd Ste 3
Concord, MA 01742
(978) 371-0854
Attorneys, General Practice Attorneys, Legal Service Plans
Kevin T Smith Law Office
73 Junction Square Dr
Concord, MA 01742
(978) 369-0634
General Practice Attorneys, Attorneys, Legal Service Plans
Wilson Alan
199 Sudbury Rd
Concord, MA 01742
(978) 341-0600
Attorneys, Legal Service Plans
Riordan Lester E
12 Damonmill Sq # Eb1n
Concord, MA 01742
(978) 341-0404
General Practice Attorneys, Attorneys
Oshana Richard T
77 Junction Square Dr
Concord, MA 01742
(978) 287-0330
Attorneys, Legal Service Plans
Holt Associates
91 Main St Ste 304
Concord, MA 01742
(978) 371-0201
General Practice Attorneys, Attorneys, Legal Service Plans
Arnold & Kangas P.C.
9 Damonmill Sq Fl 5 Su 5D
Concord, MA 01742
(978) 369-0001
Estate Planning Attorneys,  Attorneys,  Criminal Law Attorneys,  Family Law Attorneys,  Divorce Atto
12Law.com   |  NASHVILLE, TN USA   |  CONTACT US