How is corporate income taxed?
Unlike sole proprietors and owners of partnerships and LLCs, a corporation’s owners do not pay individual taxes on all business profits. The owners pay taxes only on profits paid out to them in the form of salaries, bonuses and dividends. (Dividends are portions of profits that large corporations sometimes pay out to shareholders in return for their investment in the company.) The corporation pays taxes, at special corporate tax rates, on any profits that are left in the company from year to year (called “retained earnings”). Note that this taxation scheme does not apply to “S corporations,” which are corporations that have elected partnership-style taxation. (Regular corporations, discussed above, are called “C” corporations.) If your corporation elects to be taxed as an S corporation, all of the corporation’s profits and losses will “pass through” to the owners, who will report them on their individual income tax returns. (To learn more about S corporations, see S Corporation Facts.)
Unlike sole proprietors and owners of partnerships and LLCs, a corporation’s owners do not pay individual taxes on all business profits. The owners pay taxes only on profits paid out to them in the form of salaries, bonuses and dividends. Dividends are portions of profits that larger corporations sometimes pay out to shareholders with respect to their investment in the company. The corporation has a federal employer identification number (“FEIN”). It files its own Form 1120 corporate income tax return and pays taxes at special corporate tax rates on any profits that are left in the company from year to year (called “retained earnings”). Notice that this taxation structure does not apply to “S corporations,” which are corporations that have elected treated as partnerships for purposes of income taxation. (Regular corporations discussed above are called “C” corporations.) If your corporation elects to be taxed as an S corporation, all of the corporation’s profits and losses will “pass th
Unlike sole proprietors and owners of partnerships and LLCs, a corporation’s owners do not pay individual taxes on all business profits. The owners pay taxes only on profits paid out to them in the form of salaries, bonuses, and dividends. (Dividends are portions of profits that large corporations sometimes pay out to shareholders in return for their investment in the company.) The corporation pays taxes, at special corporate tax rates, on any profits that are left in the company from year to year (called “retained earnings”). Note that this taxation scheme does not apply to S corporations, which are corporations that have elected partnership-style taxation. (Regular corporations, discussed above, are called C corporations.) If your corporation elects to be taxed as an S corporation, all of the corporation’s profits and losses will “pass through” to the owners, who will report them on their individual income tax returns. (To learn more about S corporations, see S Corporation Facts.) Fo
Unlike sole proprietors and owners of partnerships and LLCs, a corporation’s owners do not pay individual taxes on all business profits. The owners pay taxes only on profits paid out to them in the form of salaries, bonuses and dividends. (Dividends are portions of profits that large corporations sometimes pay out to shareholders in return for their investment in the company.) The corporation pays taxes, at special corporate tax rates, on any profits that are left in the company from year to year (called “retained earnings”). Note that this taxation scheme does not apply to “S corporations,” which are corporations that have elected partnership-style taxation. (Regular corporations, discussed above, are called “C” corporations.) If your corporation elects to be taxed as an S corporation, all of the corporation’s profits and losses will “pass through” to the owners, who will report them on their individual income tax returns.
