C Corporation Tax Returns
The C corporation or C Corp legal entity is very distinctive business structure. US income tax law treats a C Corp has a completely separate entity from its owners/shareholders.
You may have heard about “double-taxation” from business journals and newspaper. Unfortunately this causes many prospective business owners write off the C corporation legal structure out of fear of double taxation. C Corp is an unique legal and tax structure that has its own advantages and disadvantages. So you may be passing on a good opportunity and leavening money on the table by writing C Corp off too early.
Some pitfalls to having a C corporation form of business:
- C corporations are taxed separately from its owners/shareholders. If not managed properly this can lead to “double taxation” where the same money is taxed in one year as C corporation profit and then taxed again in the next year as salary or dividends to the employee/owner.
- The C corporation’s tax rates can be very high.
|Over||But under||Tax rate||Of amt over|
|50,000||75,000||$7,500 + 25%||50,000|
|75,000||100,000||13,750 + 34%||75,000|
|100,000||335,000||22,250 + 39%||100,000|
|335,000||10,000,000||113,900 + 34%||335,000|
|10,000,000||15,000,000||3,400,000 + 35%||10,000,000|
|15,000,000||18,333,333||5,150,000 + 38%||15,000,000|
- In order to keep the legal liability protection that a C corporation structure offers, a business owner must operate the business under a specific set of rules.
- Many states tax C corporations differently than other forms of business and can charge higher registration fees.
- Just like individuals, a C corporation can encounter the Alternative Minimum Tax (AMT).
But there can be some advantages to having an C corporation form of business:
- Unlike some other legal business structures, C corporations can deduct reasonable salaries related to owners/shareholders from corporate profits for tax purposes.
- If managed correctly, C corporations can accumulate earnings at a lower tax rate than other businesses. This can be a great strategy for minimizing capital investment cost and cash flow normalization without the need for financing.
- Some earnings can be passed down to shareholders through dividends, which might create tax benefits on the personal returns of the shareholders.
- C corporations have the greatest flexibility when seeking investors because ownership interest is transferred relatively easy through stock.
Zagotti & Burdette understands the C corporation business structure and the tax options available to those who chose this form of business. We have many years experience guiding clients through the range of tax options available based on their individual circumstances and business plans.
We don’t just prepare your C corporation tax return, we look at the return holistically to provide tailored solutions just for you and your business.
Call (832) 800-3347 today to schedule your free appointment today.