The standard coporation, also called a C Corporation, is the most
common corporate structure. It is chartered by the state in which it is
headquartered & is considered by law to be a unique entity, separate
and apart from those who own it. A corporation can be taxed; it can be
sued; it can enter into contractual agreements. The owners of a
corporation are its shareholders. The shareholders elect a board of
directors to oversee the major policies and decisions. The corporation
has a life of its own and does not dissolve when ownership changes.
To create a corporation, the proper formation documents, typically
called the articles of incorporation or certificate of incorporation, must
be filed with the appropriate state agency and the necessary state filing
fees paid.
Taxation implications are usually a significant consideration when
deciding which corporate structure to choose. Shareholders of C
corporations may experience double taxation, which simply means that
corporate profits are taxed at both the entity and individual levels.
Profits of the business are reported and taxed at the entity level first.
Then if the corporation distributes any portion of the remaining profits
to shareholders in the form of dividends, the shareholders must report
the dividend as personal income and pay taxes on it at the individual
level.
Form 1120 or 1120-A: Corporation Income Tax Return
Form 1120-W: Estimated Tax for Corporation
Form 8109-B: Deposit Coupon
Form 4625: Depreciation
Employment Tax Forms
Other forms as needed for capital gains, sale of assets, alternative
minimum tax, etc.
Santos Associates, FEDERALLY AUTHORIZED TAX
PRACTITIONERS, can help you with your accounting, tax
and financial planning needs. Call today for an appointment &
consultation. We are not attorneys, we can refer competent council
upon request.
A Corporation
ADVANTAGES of a Corporation
- Shareholders are typically not
personally responsible for the
debts and liabilities of the
business
- Corporations can have an
unlimited number of
shareholders
- Ownership is easily transferable
through the sale of stock
- Corporations have unlimited life
extending beyond the illness or
death of owners
- Certain business expenses may
be tax-deductible
- Additional capital can be raised
by selling shares of the
corporation's stock
DISADVANTAGES of a Corporation
- Double taxation of profits may
occur
- Corporations are more
expensive to form than sole
proprietorships and partnerships
and face ongoing state-imposed
filing requirements and fees.
- Corporations face ongoing
corporate formalities, such as
holding and properly
documenting annual meetings
of directors and shareholders
