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 Clyde Park, MT

Pros and Cons of Taxation as a Corporation in Clyde Park, MT


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 MT 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 MT 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 Clyde Park, MT
Montoya Elisabeth
233 Edelweiss Dr # 10A
Bozeman, MT 59718
(406) 582-9676
Attorneys, Construction Law Attorneys
Refling Dorie Benesh
233 Edelweiss Dr Ste 101A
Bozeman, MT 59718
(406) 582-9676
Attorneys, Legal Service Plans
Hud John
670 S Ferguson Ave # 2
Bozeman, MT 59718
(406) 587-8989
Attorneys
HUD Law Office PC Atty
670 S Ferguson Ave Ste 2
Bozeman, MT 59718
(406) 587-8989
Attorneys, General Practice Attorneys
Garrity Michael G
3825 Valley Commons Dr # 6
Bozeman, MT 59718
(406) 582-8822
Attorneys
Avignone Alfred F
3825 Valley Commons Dr # 6
Bozeman, MT 59718
(406) 582-8822
Attorneys, Criminal Law Attorneys, General Practice Attorneys
Banick Lisa A
3825 Valley Commons Dr # 6
Bozeman, MT 59718
(406) 582-8822
Attorneys, Construction Law Attorneys, Legal Service Plans
Dockins William S
3825 Valley Commons Dr # 5
Bozeman, MT 59718
(406) 586-8616
Attorneys,  Wills, Trusts & Estate Planning Attorneys,  Corporation & Partnership Law Attorneys,  B
Roth Daniel J
2417 W Main St # 2A
Bozeman, MT 59718
(406) 586-8615
Attorneys, Insurance Attorneys
Fulton Angus
21 Apex Dr
Bozeman, MT 59718
(406) 587-8486
Attorneys, Legal Service Plans
Filz Tim Atty
510 S 23rd Ave
Bozeman, MT 59718
(406) 587-8486
Attorneys, Legal Service Plans
Christensen Fulton Filz P
21 Apex Dr
Bozeman, MT 59718
(406) 587-8486
Attorneys, Wills, Trusts & Estate Planning Attorneys, Legal Service Plans
Christopher K. Williams - Avignone, Banick & Williams, PLLC
3825 Valley Commons Dr Suite 6
Bozeman, MT 59718
(406) 586-8330
Personal Injury Law Attorneys,  Attorneys,  Criminal Law Attorneys,  Automobile Accident Attorneys,
Kommers James M
517 S 22nd Ave # 5
Bozeman, MT 59718
(406) 587-7717
Accident & Property Damage Attorneys, Insurance Attorneys, Attorneys
Kasting Kauffman & Mersen P.C
716 So 20th Av Suite 101
Bozeman, MT 59718
(866) 435-6395
Probate Law Attorneys,  Attorneys,  Criminal Law Attorneys,  Family Law Attorneys,  Divorce Attorney
Lund Law
502 S 19th Ave # 306
Bozeman, MT 59718
(406) 586-6254
Attorneys, Legal Service Plans
Quinn Robert J
2405 W Main St # 4
Bozeman, MT 59718
(406) 586-5956
Attorneys, Legal Service Plans
Combs C Bruce
1940 W Dickerson St # 206
Bozeman, MT 59718
(406) 586-5909
Attorneys
Cbruce Combs PC
1940 W Dickerson St Ste 206
Bozeman, MT 59718
(406) 586-5909
Attorneys, Wills, Trusts & Estate Planning Attorneys, Legal Service Plans
Black Marjorie
2304 W Main St # 3
Bozeman, MT 59718
(406) 582-5800
Admiralty & Maritime Law Attorneys, Attorneys, Wills, Trusts & Estate Planning Attorneys
Christoffersen Laura Attorney
20 Broadway St
Culbertson, MT 59218
(406) 787-5700
Attorneys, General Practice Attorneys, Legal Service Plans
Delmue Jason A
602 S Ferguson Ave # 5
Bozeman, MT 59718
(406) 585-5598
Attorneys
J Collen Herrington
602 S Ferguson Ave Ste 5
Bozeman, MT 59718
(406) 585-5598
Attorneys, Construction Law Attorneys, Real Estate Attorneys
Reader Margaret M
602 S Ferguson Ave # 5
Bozeman, MT 59718
(406) 585-5598
Attorneys
12Law.com   |  NASHVILLE, TN USA   |  CONTACT US