Thursday, 30 January 2014

How Tax Payment Has A Deeper Impact On Businesses?

Do you know the way your company is structured it is going to have a great imp-act on the taxation? For example, if you are the sole owner of your business then you are taxed individually. However, if you won a corporation then the profits gets taxed  and finally the dividends which are paid to the shareholders.

·         Single Ownership

In a single ownership, the owner and the company is the same person. It is the responsibility of the business owner to pay the estimated tax quarterly to the federal and local governments. Tax preparation for the individual owners is relatively easy and the tax rates are lower.

·         Limited Venture

Limited partnerships that are started by the companies like real estate developers, film production companies, and law firms and getting popular. The advantages include liability protection up to the amount of investment for each company’s limited ventures. Tax implication is that company’s profits are carried to the partners report on their personal tax returns.

·         Limited Liability Company (LLC)

Forming LLC enables business owners “wall off” their personal assets. Due to the judgments made against the company, the LLC has the feature of not having corporate tax returns. The owners report on the profit or loss on their personal taxes.

·         C-Corporation

The “C-Corp,” is a form of business structure, which guards the personal assets of a director and a stockholder from the judgment made against the company. C-Corp can issue stock and has uninterrupted existence after a founder or owner leaves or dies. The drawback of this kind of business structure is that profits are taxed when earned and then taxes are again distributed as shareholders’ dividends. This is popularly called double taxation.

·         S-Corporation

Here, the “double taxation” of corporate income and shareholder dividends associated with the C-Corporation tax status gets eliminated. If a company falls under the C-Corp category, it must pay corporate tax around  34%. Then the remaining get distributed to the other three shareholders and finally taxed at the  federal dividend tax rate of 15%.

The structure of the company is going to have a vast impact on the taxes that you are going to pay in the form of tax. You can consult an expert like the CPA or an attorney, to determine which is the right format to file tax returns for your company. If you have to pay tax to Uncle Sam, take the help of reputed tax consultants to get rid of the problems easily.

Author's Bio: Moumita Dasgupta, a financial blogger and the owner of bizandfiz, shares her knowledge and expertise of various financial topics. A clear view on market, business, Forex, funds, personal finances etc. are the subjects she perfectly underlines through her articles.  Find Moumita on Google+


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