As most of us know, filing taxes as an individual taxpayer can be challenging because of the myriad IRS rules and regulations. The challenges may increase if you operate a business, especially one that is incorporated. That is because companies are governed by a different set of IRS tax rules than those for individuals.
Three types of corporate business structures exist: Limited liability corporations (LLCs), S-corporations, and C-corporations. Each of these has different rules that govern their taxation. These three incorporated entities for businesses are in addition to sole proprietorships, which are unincorporated businesses.
Tax is due against business profits, which often include capital gains of a company or association. For all businesses, tax on earnings is determined by deducting expenses from gross revenue.
Beyond that, there are different rules and schedules depending on which type of business structure you have. Taxation of LLCs is generally simpler than S- and C-Corps. In an LLC, the tax burden is ‘passed through” to the owners.
S-Corporations operate under the “S” subsection of the IRS code. Taxes are levied against the members, not the S-Corp itself.
Taxation of the C-Corporation is commonly more complicated than the previous two entity types. Importantly, the C-Corp itself is taxed. Dividends, if any, are distributed to members and are taxed as personal income.
These descriptions just scratch the surface. Each business is unique and likely to have one or more major particular tax considerations.
It may be a good idea to seek competent help when dealing with the taxation of business entities in Rancho Cucamonga, California. Look no further than Whyte & Associates, Inc. They can review your business tax situation to advise you on saving the most taxes for your unique business situation. Conveniently located in Rancho Cucamonga, they can be reached at (909) 575-0080.
