Skip to content
Comparison of Taxation between Corporations and Other Business Structures
- A corporation is the only business that pays its own income tax.
- Corporations have benefits like deducting expenses and carrying losses forward.
- Corporations offer perpetual existence and the ability to attract investors.
Tax Benefits of Corporations
- Corporations can deduct salaries, benefits, and operating costs.
- They may have lower rates on some income.
- Corporations can carry losses forward fully.
Specific Tax Benefits of Owning a Corporation
- Taxes depend on income after deducting expenses.
- Avoiding double taxation is possible.
- Some financial assets aren’t treated as taxable exchanges.
Corporate Taxation Details
- Corporations can extend filing by 6 months.
- Assets over $10 million must file electronically.
- The flat corporation tax rate is now 21%, reduced from 35% in 2018.
- Corporations can deduct expenses sole proprietors cannot, like cable and Internet.
Tax Benefits of Incorporating as a C Corporation
- A C Corporation is legally and tax-wise independent of shareholders.
- The 21% corporate tax rate may benefit owners otherwise in high brackets.
- Credibility with customers and partners may improve after incorporating.
- Consult advisors on potential advantages.
Benefits of S Corporations
- An S corp passes income, losses, and deductions to shareholders.
- S corps have limited liability and avoid double taxation.
- To qualify, shareholders are limited to 100.
Considerations for LLC Members and S-Corporation Shareholders
- LLC members and S-Corporation shareholders owning over 2% pay taxes on benefits.
- Evaluate options before deciding.
IRS Requirements for S-Corporation Status
- When considering S-Corporation status, a corporation must meet IRS requirements.
- Ownership is limited to 100 shareholders.
- Only one class of stock is issued.
- Shareholders are US citizens or residents.
Exploring Tax Advantages of Incorporating
- Incorporating as a C Corporation means an attractive 21% tax rate.
- Business owners in high brackets could benefit.
- Credibility may improve with customers and partners.
- Incorporating has tax advantages to explore.
