There’s a reason why CEOs, Presidents and entrepreneurs often get someone on the books to handle all the corporation taxation stuff: it’s because with respect to corporation registrations, taxes are confusing! Compared to LLCs, corporations are equivalent to rabbit holes of ridiculousness. Fall into one, and you won’t know where to go.
But there is hope when traversing the slippery slope of corporate taxation
Sure, LLCs allow flexibility. But what if your business scenario practically demands registration for either a C corporation or S corporation? While you won’t benefit from the standard “pass-through entity” model that comes with LLCs, profits going straight to members, the fact is sometimes a company you’re registering has to be taxed as its own single income.
But here’s where it gets tricky: as a corporation, you’re not only paying taxes on your profits (called the “corporate tax”) but your dividends as well, distributed to all your shareholders. And with your dividends? You get taxed twice (called “double taxation”) since salaries and bonuses for your employees don’t count (those employees don’t own the company with you).
However…. Corporate taxation does come with its plethora of perks!
- Business costs
- Advertising costs
- Operating costs
- Medical-retirement plans
All of that gets deducted from your federal tax return. Means more of a refund for you and your business, more you can invest into the corporation you’ve poured not only your money, but your heart and soul into. So at the end of the day, it can be worth it (although the fact is you may not have a choice in the matter).
Because the truth is filing as a corporation may make more sense for you
When you have that many employees, that much buy-in with investment, going public, selling and sharing stock, providing all the benefits required for employees that certainly and rightfully demand them, it makes sense. The perks are obvious. But as a corporation, these tax requirements are a necessity.
So be diligent. Climb that slope with the right equipment (tax attorney, accountant, etc. etc.). But more importantly — be in the know on how all of it works, just for your own sanity! It makes managing your company — and the finances — that much easier.
