An alternative tax classification can be an association which is taxable as a corporation or S corporation.…
Northwest Brands, Inc. is a small business incorporated in Minnesota. Its one class of stock is owned by twelve members of a single family. Ordinarily, corporate income is taxed at the corporate and shareholder levels. Is there a way for Northwest Brands to avoid this double-income taxation? Explain your answer.…
The annual withholding will not materially differ regardless of the pay period of the taxpayer. As the payroll period gets shorter, tax withholding per check will decrease, yet the total for the year will remain roughly the same.…
corporation, double taxation will not occur to the extent that income consists of business income…
Northwest Brands, Inc., is a small business incorporated in Minnesota. It's one class of stock is owned by twelve members of a single family. Ordinarily, corporate income is taxed at the corporate and shareholder levels. Is there a way for Northwest Brands to avoid this double-income taxation? Explain your answer.…
Sole Proprietorship Sole proprietorship is the most common form of business in the United States. It is a relatively simple way for an individual to start a business since legal costs and business requirements are minimal, and the owner has complete control over the business. Though a sole proprietor is not responsible for any corporate tax payments, the owner is responsible for taxes incurred on the income generated from the business as part of his or her personal income tax payments, and personally shoulders any other risks or obligations. A sole proprietor may also choose to file their business under a fictitious business name or a DBA (doing business as), allowing him or her to operate and market the business under a more typical business name rather than their personal name. However, the business is not considered a separate entity and the sole proprietor is still personally liable for all obligations incurred by the business. Characteristics to keep in mind about Sole Proprietorship 1. Liability There is a lack of protection from personal liabilities, meaning that the personal assets of a sole proprietor is at risk in the event of litigation. If the business fails, any creditor can go after the business assets of the business as well as the personal assets of the owner. 2. Income Taxes The business owner is responsible for paying taxes on all profits generated by the business as personal income and does not need to do a separate corporate tax filing. The proprietor can also reduce his or her taxable income by charging off business expenses. 3. Longevity or continuity of the organization Since finding a source of funding is one of the biggest challenges a sole proprietor may face, it hinders the business to have longevity or continuity. In most cases, the funding comes from the proprietor's limited personal assets which can inhibit the future growth of the business. 4. Control The sole proprietor has full control of all the business decisions and can expand,…
“The Internal Revenue Service lets business owners choose from one of several business structures that that affect taxation (Hamel, 2014)”. Business owners may select one of types of business structure that affect taxation such as sole proprietorships, partnership or corporation. Each structure is built, taxed, ruled and regulated by the Internal Revenue Service (IRS). It is the responsibility of the a sole proprietorship owner to report annual business income for taxation purpose. For corporations, the entity is taxed and the owner is not directly charged with taxation.…
They can set up several different forms of organization. First of all, a sole proprietor is someone who owns an unincorporated business by himself or herself. A general partnership is duties of where all partners participate to some extent in the day-to-day management of the business. Limited partnerships are very different from general partnerships, and are usually set up by companies that invest money in other businesses or real estate. The C Corporation is the standard corporation, while the S corporation has elected a special tax status with the IRS. It gets its name because it is defined in Subchapter S of the Internal Revenue Code. To elect S corporation status when forming a corporation, Form 2553 must be filed with the IRS and all S corporation guidelines met. A limited liability company (LLC) is a flexible form of enterprise that blends elements of partnership and corporate structures. While limited partnerships have at…
A corporation is a standalone entity. There are two types of corporations, general or S Corp. Advantages of corporations consist of limited liability, capital through stock sales, attractive to employees, and receiving corporate tax treatment. S Corps, in addition to limited liability, have tax savings as the owners are taxed individually. A disadvantage of an S Corp is the limited growth as S Corps may not have greater than 100 shareholders. General corporations file taxes separately from his or her owners while S Corporations do not. Disadvantages of a corporation are time and money, large amounts of recordkeeping, and subject to double taxation. Double taxation is taxation on the corporate level and again on a member’s personal level (“U.S. Small Business Administration,” 2013). Corporations are generally suited for large business organizations.…
in 2001 and 2003. They brought down federal income tax rates for everyone, decreased the…
One of the largest benefits is no double taxation. The shareholders are only taxed at the shareholder level. Also, unlike a partnership, where all the partners are subject to self-employment tax on income from the firm, only wages earned are subject to a self-employment tax in an S corporation. In an S corporation shareholders may be employees, and the wages paid are deductible from the net income but are also subject to payroll taxes and therefore you may be inclined to pay lower wages to avoid this tax. Keep in mind though, that if you understate your wages from normal industry salaries the IRS may require you to pay higher salaries relative to the industry and position. Nevertheless, if prepared properly, this rule should only be beneficial. Another large benefit of the S Corporation status is that it stands alone separate from its shareholders. If any of you decide to leave the company for any reason, then the company can continue to run its daily business without much interruption.…
If you hear people discussing the Fair Tax Act but aren't yet familiar with it, you'll probably wonder what the fuss is all about. One side says that the act will solve a lot of the United States's taxation issues, while the other points out that it will bring on a whole new set of problems.…
Money seems to be the root of the problems that surround us in our daily lives. Depending on how much we earn from employment that number is concentrated on our social class in society. However, regardless of our social class we all pay a form of federal tax. Federal tax is a tax levied by the United States Internal Revenue Service on yearly earnings of employees, corporations, trusts, and other legal entities. These taxes that are collected contribute to approximately 47 percent of the federal government’s revenue. This money subsidizes national defense and funds federal programs such as welfare and infrastructure. A percentage of our income is taxed according to the amount we earn; it varies from ten percent when making zero to 20,000 dollars to 30 percent when making 50,000 dollars and above. The controversy of eradicating federal income tax involves all American residents…
Taxes have been part of our economy for a long time and are enforced by the government or other agencies, on income and expenses. Taxation in the United States began when it was composed of colonies. During this time taxes were imposed on commodities through legislative such as the Stamp Act, the Sugar Act, Townshend Revenue Act, and Tea Act. Later, in 1913, the states ratified the sixteenth amendment, which gave congress power to tax incomes. Taxes were imposed on individuals according to their wealth. This was a way in which revenues were raised for public expenditure. But recently, taxation has been a way of ensuring that the split between the rich and poor. Since 1913, many changes have been implemented to the tax system. Rates and exemptions have shifted, marginal rates have sky rocketed, and the system has become very complex. Every time Congress implements new changes to the tax system it is called tax reform. Tax reformers have different goals. Some seek to reduce the level of taxation of all people by the government. Some seek to make the tax system more or less progressive. Others seek to simplify the tax system and make it more understandable, or more accountable. In this paper I will define the three tax systems: Flat Tax, National Tax, and the Status Quo. These are taxing systems that reformers have to ponder when thinking about making changes.…
Two authors by the names of Paul Krugman and Fred E. Foldvary have varying opinions on the topic of taxing the rich. The debate they’re writing about is whether or not the US should increase the tax burden on the rich. Foldvary states in his “The Evil of Taxing the Rich” article that there are a lot of negative affects that would come along with taxing the rich. Mainly, he says the rich are paying a much larger percentage of federal taxes already, so their taxes shouldn’t be any higher. Also, he makes point that increasing the tax burden on the rich is an evil lie because the taxes the rich pay are returned to them through land-value subsidies. Paul Krugman believes that the middle class’ tax burden is unfair and harsh when compared to the tax burden on the rich people in America. His main point in his argument is that the income growth for the upper class since World War far outweighs that of the middle class. Since World war two, the income of the richest Americans has grown by 480 percent.…
