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 Cassville, PA

Pros and Cons of Taxation as a Corporation in Cassville, PA


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 PA 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 PA 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 Cassville, PA
Getsinger Bruce L
1243 Liberty St Ste 518
Franklin, PA 16323
(814) 432-9456
Social Security & Disability Law Attorneys, Attorneys, Corporation & Partnership Law Attorneys, Gene
Getsinger Bruce L
1243 Liberty St # 518
Franklin, PA 16323
(814) 432-9456
Attorneys,  Social Security & Disability Law Attorneys,  Corporation & Partnership Law Attorneys,  G
Lackatos John C
1040 Elk St
Franklin, PA 16323
(814) 437-9278
Criminal Law Attorneys, Attorneys
Wilson Lloyd
1243 Liberty St # 406
Franklin, PA 16323
(814) 677-9196
Bankruptcy Law Attorneys, Attorneys, Legal Service Plans
Mt Royal Lawyers
1007 Mount Royal Blvd
Pittsburgh, PA 15223
(412) 492-8975
Mon. - Fri. 9am - 5pm, Sat. - Sun. CLOSED
Sheppard James P
85 E Main St
Elizabethville, PA 17023
(717) 362-8651
Attorneys,  Criminal Law Attorneys,  Family Law Attorneys,  Divorce Attorneys,  Business Law Attorne
Mason H Denning
817 E Bishop St
Bellefonte, PA 16823
(814) 353-8600
Attorneys, Family Law Attorneys, Legal Service Plans
Stover Jeffrey W
122 E High St
Bellefonte, PA 16823
(814) 355-8235
General Practice Attorneys, Attorneys
Huber & Palsir, LLC.
201 Spring Garden St Ste 201
Philadelphia, PA 19123
(267) 773-6114
Legal Service Plans,  Accident & Property Damage Attorneys,  Corporation & Partnership Law Attorneys
Solle Randy P
506 9th St
Franklin, PA 16323
(814) 432-5955
General Practice Attorneys
Mc Intyre & Logsdon Law Office
1243 Liberty St # 403
Franklin, PA 16323
(814) 432-5616
Attorneys, Criminal Law Attorneys, Family Law Attorneys, General Practice Attorneys, Legal Service P
Logdsdon Sible, Pamela R Mc Intyre & Logsdon Law Office
1243 Liberty St # 403
Franklin, PA 16323
(814) 432-5616
Attorneys, Criminal Law Attorneys, Family Law Attorneys, General Practice Attorneys, Legal Service P
Brandt David P
1328 Liberty St # B
Franklin, PA 16323
(814) 432-5556
Wills, Trusts & Estate Planning Attorneys, Attorneys, Real Estate Attorneys, Legal Service Plans
Miller Kistler & Campbell Inc
124 N Allegheny St
Bellefonte, PA 16823
(814) 355-5474
Personal Injury Law Attorneys, Litigation & Tort Attorneys, Attorneys
Manchester R Bruce
124 W Bishop St
Bellefonte, PA 16823
(814) 355-5421
General Practice Attorneys, Attorneys, Legal Service Plans
Reiter Dennis O
115 E High St
Bellefonte, PA 16823
(814) 355-4769
Attorneys, Wills, Trusts & Estate Planning Attorneys, Corporation & Partnership Law Attorneys, Civil
Corbett III Patrick W
140 S Allegheny St
Bellefonte, PA 16823
(814) 353-4521
Attorneys, Family Law Attorneys, General Practice Attorneys, Legal Service Plans
E Kenneth Wall PC
644 Willowbank St
Bellefonte, PA 16823
(814) 355-4106
Tax Attorneys,  Attorneys,  Bookkeeping,  Financial Planning Consultants,  Taxes-Consultants & Repre
Foster Daniel
1320 Liberty St
Franklin, PA 16323
(814) 432-3290
Attorneys,  General Practice Attorneys,  Legal Service Plans,  Bankruptcy Law Attorneys
Antkowiak Michael J
1149 Liberty St # 3
Franklin, PA 16323
(814) 432-3289
Attorneys, Criminal Law Attorneys, Family Law Attorneys, Legal Service Plans
Kerwin, Terrence J Kerwin & Kerwin
4245 State Route 209
Elizabethville, PA 17023
(717) 362-3215
Elder Law Attorneys, Estate Planning Attorneys, Attorneys
Stover & McGlaughlin
122 E High St
Bellefonte, PA 16823
(855) 275-3154
Attorneys, Business Bankruptcy Law Attorneys, Bankruptcy Law Attorneys
Tressler William G
410 N Allegheny St
Bellefonte, PA 16823
(814) 355-3142
Attorneys, Legal Service Plans
Charles J Kroboth Jr Law Ofc
107 E High St
Bellefonte, PA 16823
(814) 355-2619
DUI & DWI Attorneys,  Legal Service Plans,  Attorneys,  Criminal Law Attorneys,  Family Law Attorney
12Law.com   |  NASHVILLE, TN USA   |  CONTACT US