Small Business Tax Options – Types of Corporations

A business is defined as a legal entity or corporation organized for the purpose of conducting commercial, industrial, or other economic activities. Companies may be either for-profit or non-for profit entities that conduct public works to meet a social objective or further a noble cause. A corporation can be organized either directly or indirectly through shareholders, owners, managers, or the officers. Private corporations may have only one class of directors and officers or multiple classes of directors and officers. Public corporations are governed by government laws and must report their assets and liabilities, and must submit reports to the applicable state authorities on a quarterly and yearly basis.

A C corporation is a type of limited liability company that may conduct business without giving up its majority ownership. A C corporation usually files its income taxes and pays corporate taxes with the IRS. Because it has fewer shareholders than a partnership, the income and profits of a C corporation are not subjected to double taxation, which means that both the income and corporate taxes are paid by the corporation itself. Dividends are paid by the shareholder to the government.

A partnership is considered a type of business, when one or more people form an entity together in order to carry on a business that combines their mutual interests and abilities to profit. Partnerships may have different types of owners and managers, and these owners and managers do not have to share in the profits of the partnership. For instance, a partnership consists of two people who decide to enter into a contracting business that will produce goods or services and pay others for the goods or services they provide. In this case, the income of the partners is included in the partners’ gross income. The person who owns the contracting firm is called the partner, and his profit is divided among the partners in the form of dividends.

A C corporation or a partnership is a separate entity from any other business. A C corporation files its income tax with the IRS as a C corporation, and its profits are also subject to tax. It can issue one installment of stock at a preset rate instead of paying out wages each month. A C corporation is not required to file reports with the SEC. A partnership’s IRS reporting requirements are more complex.

All kinds of corporations are taxed at the same rates. Income taxes are progressive. As corporate incomes rise, so are taxes on corporations. Most countries also have certain restrictions on how corporations are taxed. Some countries have a tax on foreign corporations, corporate borrowing, investment interest, ownership and transfer of ownership, bankruptcies, and dividends paid in previous years.

There are different types of corporations that are legal entities. A limited liability company is a legal entity used in some kinds of businesses. It has only one owner and is not controlled by anyone else. It has limited liability, because it has no share holders. A corporation can be created in the state and most cities have regulations for creating corporations. In all, it is important to consult a lawyer before deciding how to set up your small business.