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- iHaveNet.com: Small Business Guide
Real Small Business
The main difference between a C Corporation and other business structures is that a C Corporation files and pays corporate income taxes directly. This is because, C Corporations are considered a separate entity from their shareholders, and must pay taxes on income left over after business expenses.
There are a number of instances in which it is beneficial to become a C Corporation.
If you plan to keep profits and other chunks of cash in the bank to finance your growth, repay debt, or make other capital expenditures, C Corporation status could make sense. This is because C Corporations can take advantage of corporate income tax rates, which are sometimes lower than personal tax rates. For profitable companies, C Corporation status has the ability provide greater flexibility in terms of planning and controlling federal income taxes. C Corporations also can deduct the cost of certain fringe benefit packages.
If you form a C Corporation, be aware that you run the risk of being taxed twice on your profits - once as a corporation, and a second time as an individual when you dispense those profits as dividends or when you liquidate the corporation. This is one of the major disadvantages of a C Corporation. Let's say, for example, your company has profits of $100,000 for one year. First, the corporation will have to pay tax on it. Then, if you parcel that money out to yourself or other owners, the IRS may treat it as dividends and will tax you as an individual. If you wait until the next year to take all or part of that money as salary, you will already have paid corporate tax on it during the year it was profit, and will then pay tax as an individual when you give it to yourself as salary.
Many tax and financial experts can come up with ways to plan for profits to avoid or limit this type of double taxation. You should speak with your accountant or tax advisor to come up with the most flexible program for your company.
C Corporation Advantages
- Corporate liability for shareholders
- 100% deduction of certain benefit packages
- Greater flexibility for planning and controlling income taxes
C Corporation Disadvantages
- Requires more paperwork and is more expensive than partnership or sole proprietorship
- Possible "double taxation" on profits
Small Business Guide
- Starting Up Your Business
- Coming Up With a Winning Business Idea
- Common Startup Mistakes
- The New Rules for Startups
- Business Incubator FAQs
- Naming Your Business
- Researching Your Business
- Your Personal Savings
- Registration, Licenses, and Permits
- Getting a Tax ID Number
- Fast-Growth Startup Resources
- Structuring Your Business
- Overview: Corporations
- State Offices of Incorporation
- Incorporate Out of State?
- Writing a Partnership Agreement
- Choosing a Board of Directors
- Basics of a C Corporation
- Basics of an S Corporation
- Basics of an LLC
- Basics of a Sole Proprietorship
- Basics of a Non-Profit Corporation
- Basics of a Professional Corporation
- Basics of a General Partnership
- Basics of a Limited Partnership
- Your Company's Public Relations
- Elements of a Successful Public Relations Campaign
- How to Use Your Press Coverage Effectively
- Press Releases
- How to Write a Successful Press Release
- Sample Product/Service Press Release
- Sample Commentary Press Release
- Sample Event Press Release
- Sample Tips Press Release
- Sample Personnel Press Release
- Effective Competitive Analysis
- Managing Purchasing to Maximize Cash Flow
- Top Six Pricing Mistakes Businesses Make
- How to Avoid Lowering Your Prices
- Bidding Basics
- Hiring Staff
- Creating an Effective Job Description
- Do You Know How to Pick Them?
- Little-Known Hiring Resources
- Classifying Contract Workers
- Tips for Successful Interviewing
- What You Can't Ask in a Job Interview
- New Hire Paperwork
- Small Business Insurance
- Types of Insurance for Small Businesses
- Small Business Insurance FAQs
- Insurance Resources for Small Businesses
- Home Office Insurance: Myths & Realities
- Small Business Resources
- Government Resources for Small Business on the Web
- Resources for Women Entrepreneurs
- Fast-Growth Startup Resources
- Small Business Security Resources
- Taking Time Off
- Your Pre-Vacation Checklist
- How to Take a Vacation
- Learning to Delegate
- Getting Away When You Can't Get Away
- Preparing for Tax Season
- Year-End Planning Tax Savers
- 10 Ways to Pay Less in Tax
- 25 Common Business Deductions and Expenses
- Avoid These Common Errors and Audit Triggers
- Understanding the Home Office Deduction
- Corporate Income Taxes Primer
- Employment Taxes Primer
- Sales Tax Primer
- Sole Proprietorships and Partnerships Tax Primer
- How to Get a Filing Extension
- Year-End Reconciliation
- Getting the Most from Your Accountant
- Developing Accurate Financial Projections
- Cash Flow
- 10 Ways to Help Increase Your Cash Flow
- Cash vs Accrual Accounting
- Bookkeeping and Record Keeping Basics
- Quick Ways to Get Through a Cash Crunch
- Projecting Cash Flow
- Cash Flow Triage
- Getting Funding
- Cash Flow Through Factoring
- Small Business Investment Corporations (SBIC)
- Traditional Funding Sources
- Non-Traditional Funding Sources
- Your Company's Credit
- How to Read a Business Credit Report
- Credit Terms Glossary for Your Small Business
- How to Protect and Improve Your Business Credit Rating
- Give Your Business the Financing Edge
- Employee Compensation
- Employee Benefits
- Bonuses: How To Be Fair
- Workers' Compensation Q&A
- Keeping Workers' Compensation Costs Down
- Payroll Management Choices
- Key Elements of Payroll
- Working with a Payroll Service Provider
- How to Create a Business Plan
Starting Your Own Business - Basics of a C Corporation
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