In the Era of Entrepreneurship, a lot of people want to leave their big fixed pays and want to give shape to their ideas in their own business. But the whole idea gets into a standstill when legal statutes need to be put in place. To be Or not be starts ringing, as the confusion arises on which entity to choose.
To start your own business, you need to have a detailed plan, number of partners, a 5 years plan, other business objectives such as do you intend to carry the business for long or you are developing something which you intend to divest/ exit later on. The booming Investors market also looks very tempting, that has its own calculations- pros and cons.
You should make sure that the business model youâ€™re choosing suits your needs.
Partnerships and LLC are two of the best business models that anyone can opt for. But mind you,Â if you are developingÂ something and will need funding itâ€™s better to opt for â€“ C corp.
C Corporation is the most essential type of corporation in the country which offers unlimited growth probability through stock selling, which implies you can easily attract Â investors. If you are planning to invest in any such corporation any time soon, then you got to stay informed regarding the C Corporation taxation in the United States.
Why do you need to form a C Corp instead of a partnership firm?
- C-Corps enjoy limited liability and all the officers, shareholders, directors and employees are eligible for this.
- Perpetual existence is present in C Corps even if the owner resigns from the firm.
- C Corps enjoy superior credibility because these organizations are respected a lot amongst lenders and suppliers.
- C Corps also come with a huge growth potential.
- Thereâ€™s absolutely no shareholders limit and as soon as the company reaches the 10 million USD mark in terms of assets and 500 shareholders in total, a simple registration with the SEC is required under the 1934â€™s Securities Exchange Act.
- C Corps also enjoy tax-deductible company expenditures.
These advantages are good enough to motivate an entrepreneur to start off a C Corp. A C Corp might be required to pay an alternate minimum tax. Therefore, you as an entrepreneur need to plan for it beforehand. It is important to keep yourself posted regarding the updates on C Corp tax payment schedules and deadlines.
A lot of people ask whether the distributions from C Corps are regarded as dividends or not. Well, to answer that question, any type of distribution which is carried out from the profits and earnings of a C Corp is treated as a dividend. There are certain exceptions which are applied to treat specific distributions as made in trade for stocks. These kinds of exceptions comprise in distributions in absolute termination of a stakeholderâ€™s interest.
This is a basic accounting procedure that every tax payer needs to undertake at the end of the year. It helps you in keeping your financial statements updated at all times.
Donâ€™t waste your time thinking about which type of company to start. Instead, choose C Corp and start planning ahead of time to maximize your profits. If you are facing any difficulty while understanding the taxation of C Corps, go through this article carefully. File your tax returns on time and enjoy the financial year in the best probable way!
Stay tuned as we will soon discuss about S corp!
“A fine is a tax for doing wrong. A Tax is a fine for doing well! ” – Anonymous