How exactly is a corporation taxed?
Posted on March 31, 2009 by admin
stebbinsd asked:
A distinct feature of the corporate business model is that they’re taxed “as a corporation.” What exactly does that mean? What are the details of being taxed as a corporation? Please cite your answers if you want to be rated as a best answer.
A distinct feature of the corporate business model is that they’re taxed “as a corporation.” What exactly does that mean? What are the details of being taxed as a corporation? I’m looking for tax on a federal level. Please cite your answers if you want to be rated as a best answer.
A distinct feature of the corporate business model is that they’re taxed “as a corporation.” What exactly does that mean? What are the details of being taxed as a corporation? Please cite your answers if you want to be rated as a best answer.
A distinct feature of the corporate business model is that they’re taxed “as a corporation.” What exactly does that mean? What are the details of being taxed as a corporation? I’m looking for tax on a federal level. Please cite your answers if you want to be rated as a best answer.
They’re taxed on their net income, at the corporate tax rates, assuming that you are talking about a C-Corp. See the instructions for Form 1120 on the IRS website.
An S-Corp is a pass-through entity; the net income passes to the personal tax returns of the shareholders via Schedule K-1 in the same proportion as their ownership in the Corp and in the same classification as the income, i.e. ordinary income, capital gains, dividends and interest, etc. See the instructions for Form 1120-S on the IRS website.
To explain the basic differences between a corporation it is regarding as a seperate entity different from a sole prop. or partnership. Sole Prop. and partnership are considered businesses owned by one or more individuals, these are not employees. Those individual’s report the business net income on their personal income taxes, via a Schedule C, or K -1 A corporation is a entity of its own having shareholders, and employees. A C corporation pays taxes on its net profit, before shareholder dividend. The taxes are reported on Form 1120. It gets more complicated if the corporation is a S Corp, the corporation doesn’t pay it’s own taxes, they profits are distributed to the shareholders via K-1 to report on their individual income taxes. (readers digest version)