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 48822

Pros and Cons of Taxation as a Corporation in Zip Code 48822


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 MI 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 MI 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 48822
Bari D. Berkowitz, MA., LLP, LLMFT
5777 W Maple Rd Ste 175
West Bloomfield, MI 48322
(248) 207-9911
Family Law Attorneys, Attorneys, Divorce Assistance
Fette, Jessica A
249 Enterprise Way
Benton Harbor, MI 49022
(269) 934-9747
Attorneys
Dettman Fette & Bell
249 Enterprise Way
Benton Harbor, MI 49022
(269) 934-9747
Attorneys, Wills, Trusts & Estate Planning Attorneys, Family Law Attorneys
Coding Compliance Solutions
7128 Hillside Dr
West Bloomfield, MI 48322
(248) 661-9700
Attorneys Referral & Information Service, Legal Consultants-Medical
Vince Lorelli Law Firm
7031 Orchard Lake Rd
West Bloomfield, MI 48322
(248) 538-9696
Attorneys, General Practice Attorneys
Doyle Group Attorneys PC
927 Illinois Ave
Holland, MI 49422
(616) 335-9321
General Practice Attorneys, Attorneys
Bennethum Mary Lu
5640 W Maple Rd Ste 110
West Bloomfield, MI 48322
(248) 851-9300
Attorneys, Legal Service Plans
Weiss, Ronald S
7035 Orchard Lake Rd
West Bloomfield, MI 48322
(248) 737-8000
Attorneys, Lemon Law Attorneys, Legal Service Plans
Aggressive Attorneys
4146 Oakwood Blvd
Melvindale, MI 48122
(313) 381-7777
General Practice Attorneys, Attorneys
Kaly Roger M
4146 Oakwood Blvd
Melvindale, MI 48122
(313) 381-7777
Attorneys, Family Law Attorneys
Tall & Tall Attorneys
107 Water St
Benton Harbor, MI 49022
(269) 934-7750
Social Security & Disability Law Attorneys,  Attorneys,  General Practice Attorneys,  Administrative
Pugh Charlette
107 Water St # 201
Benton Harbor, MI 49022
(269) 934-7750
Attorneys
Shenkan Law Firm
6775 Daly Rd Ste 104
West Bloomfield, MI 48322
(248) 562-7322
General Practice Attorneys, Attorneys, Legal Service Plans
Kassab Arabo, P.C.
6775 Daly Rd, Suite 105
West Bloomfield, MI 48322
(248) 865-7227
Attorneys,  Wills, Trusts & Estate Planning Attorneys,  Real Estate Attorneys,  Bankruptcy Law Atto
Burch & Banyon
1211 E Napier Ave
Benton Harbor, MI 49022
(269) 926-6135
Attorneys,  Criminal Law Attorneys,  Employment Discrimination Attorneys,  Family Law Attorneys,  Di
Stillman, Michael R. - Stillman Law Office
7091 Orchard Lake Rd Suite 270
West Bloomfield, MI 48322
(248) 851-6000
Attorneys, Business Law Attorneys, Real Estate Attorneys, Litigation & Tort Attorneys
Wallace and Wallace
7071 Orchard Lake Rd Ste 255
West Bloomfield, MI 48322
(248) 932-5644
Attorneys, General Practice Attorneys
Sucher Bruce A
6230 Orchard Lake Rd Ste 105
West Bloomfield, MI 48322
(248) 626-5555
General Practice Attorneys, Attorneys, Legal Service Plans
Ross Hickman
8275 W State St
Central Lake, MI 49622
(800) 424-5297
Attorneys,  Criminal Law Attorneys,  Divorce Attorneys,  DUI & DWI Attorneys,  Legal Service Plans
Mary G. Falcone, P.C.
6420 Farmington Road, Ste 106
West Bloomfield, MI 48322
(248) 594-4887
Divorce Attorneys, Family Law Attorneys, Real Estate Attorneys, Attorneys
Segal Richard E & Associates
6230 Orchard Lake Rd
West Bloomfield, MI 48322
(248) 855-4880
Attorneys, Corporation & Partnership Law Attorneys, Business Law Attorneys, Real Estate Attorneys, G
Weberman Paynter Groves Newman Attorneys
7071 Orchard Lake Rd
West Bloomfield, MI 48322
(248) 737-4500
General Practice Attorneys, Attorneys
Saroki Allan
7031 Orchard Lake Rd Ste 201B
West Bloomfield, MI 48322
(248) 406-4422
Attorneys, Collection Law Attorneys
Bruce H Tobin Plc
7001 Orchard Lake Rd Ste 312
West Bloomfield, MI 48322
(248) 851-4300
Attorneys, Legal Service Plans
12Law.com   |  NASHVILLE, TN USA   |  CONTACT US