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 Otway, OH

Pros and Cons of Taxation as a Corporation in Otway, 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 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 OH 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 OH 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 Otway, OH
Strickler Randal L
13 E Main St
Norwalk, OH 44857
(419) 668-8654
Attorneys,  Family Law Attorneys,  Juvenile Law Attorneys,  Real Estate Attorneys,  Legal Service Pl
Ruggles Warren W
10 1/2 Benedict Ave
Norwalk, OH 44857
(419) 668-8540
Attorneys, Bankruptcy Law Attorneys, Wills, Trusts & Estate Planning Attorneys
Jackson Michael B
51 E Main St # B
Norwalk, OH 44857
(419) 668-8403
Attorneys,  Family Law Attorneys,  Legal Service Plans,  Bankruptcy Law Attorneys
Allton John D
49 Benedict Ave Ste C
Norwalk, OH 44857
(419) 668-8211
Domestic Violence Attorneys, Attorneys, Bankruptcy Law Attorneys, Personal Injury Law Attorneys, Emp
Hiltz, Wiedemann, Allton & Koch Co. LPA
49 Benedict Ave
Norwalk, OH 44857
(419) 668-8211
Bankruptcy Law Attorneys,  Attorneys,  Family Law Attorneys,  Personal Injury Law Attorneys,  Employ
Thornton Hardwood & Weisenburger
50 N Linwood Ave
Norwalk, OH 44857
(419) 668-7984
Wills, Trusts & Estate Planning Attorneys, Attorneys, General Practice Attorneys, Legal Service Plan
Wineman Reese
6 W Main St
Norwalk, OH 44857
(419) 668-6840
Criminal Law Attorneys,  Attorneys,  Legal Service Plans,  Family Law Attorneys,  Divorce Attorneys,
Clifford, T Douglas
26 Benedict Ave.
Norwalk, OH 44857
(419) 677-6347
Criminal Law Attorneys, DUI & DWI Attorneys, Family Law Attorneys, Traffic Law Attorneys, Attorneys
Schafer Scott P
100 W Main St
Madison, OH 44057
(440) 428-6226
General Practice Attorneys, Attorneys
Martin Robert D
850 McDaniel Ave
Minerva, OH 44657
(330) 868-6161
General Practice Attorneys, Attorneys, Legal Service Plans
Lonz Brian J
5 W Main St
Norwalk, OH 44857
(419) 668-5669
General Practice Attorneys, Attorneys
Gentzel Robert W
32 Benedict Ave
Norwalk, OH 44857
(419) 663-5554
Attorneys,  Accident & Property Damage Attorneys,  Wills, Trusts & Estate Planning Attorneys,  Real
Melissa A. Angst LLC
4 Laurel Ln
Norwalk, OH 44857
(419) 293-5464
Family Law Attorneys, Divorce Attorneys
Freeman Laycock & McDaniel
54 E Main St
Norwalk, OH 44857
(567) 424-5081
Attorneys,  Family Law Attorneys,  Divorce Attorneys,  Business Law Attorneys,  Real Estate Attorney
Sitterly James J
13A E Main St
Norwalk, OH 44857
(419) 668-4984
Attorneys, Criminal Law Attorneys, Family Law Attorneys, Juvenile Law Attorneys, DUI & DWI Attorneys
Laycock Jeffrey P
54 E Main St
Norwalk, OH 44857
(419) 668-4896
Attorneys
Allton John D
103 Fairway Cir
Norwalk, OH 44857
(419) 663-4527
Domestic Violence Attorneys, Attorneys
Freeman Thomas H
12 Whittlesey Ave
Norwalk, OH 44857
(419) 668-4484
Wills, Trusts & Estate Planning Attorneys, Attorneys, General Practice Attorneys, Legal Service Plan
Battista & Battista Attorneys
211 N Market St
Minerva, OH 44657
(330) 868-4248
Bankruptcy Law Attorneys,  Attorneys,  Bankruptcy Services,  General Practice Attorneys,  Legal Serv
Clark Chaddock Susan
201 N Market St
Minerva, OH 44657
(330) 868-4210
General Practice Attorneys, Attorneys, Legal Service Plans
T Craig Eschrich
19 Whittlesey Ave
Norwalk, OH 44857
(419) 554-3200
General Practice Attorneys, Attorneys, Legal Service Plans
The Owens Law Firm
2 Oak St
Norwalk, OH 44857
(419) 663-2871
General Practice Attorneys, Attorneys, Legal Service Plans
Wiles John W
6550 N Ridge Rd
Madison, OH 44057
(440) 428-2136
General Practice Attorneys, Attorneys
Wiles & Richards Attorneys
6550 N Ridge Rd Ste 101
Madison, OH 44057
(440) 428-2136
Attorneys
12Law.com   |  NASHVILLE, TN USA   |  CONTACT US