What is Corporation Tax?
Okay, at the federal level regular (read large) corporations pay corporate income tax. Smaller corporations which elect to file as S-Corporations, Limited Liability Companies, Partnerships and Sole Proprietorships pass their profits through to their owners who pay personal income tax on the profits. At the state level the taxation picture varies from state to state. I suspect that the corporation tax you have heard about is a state tax of some kind. When you say a limited company I think you are referring to a Limited Liability Company. If so, this is a form of business organization which limits the liability of the owner(s) and allows them to protect their personal assets from many types of legal action. The savings come about because the double taxation on ordinary corporations is eliminated. Instead the profits are taxed only at the personal level and not at both the corporate and personal level.. By filing as an S-Corporation instead of filing as an ordinary corporation you don’t p
Corporate tax refers to a tax levied by various jurisdictions on the profits made by companies or associations. As a general principle, the tax varies substantially between jurisdictions. In particular allowances for capital expenditure and the amount of interest payments that can be deducted from gross profits when working out the tax liability vary substantially. Also, tax rates may vary depending on whether profits have been distributed to shareholders or not. Profits which have been reinvested may not be taxed. The above definition is a little complex. The important thing to remember is that in the United States corporations are required to file taxes annually and many states and localities also require filing of corporate tax returns.
