Decide How Your Small Biz Will Be Taxed
Understanding and choosing how a small business is taxed is an important decision for business owners. The stakes are very high as an incorrect choice may prove costly to correct. By making the proper choice, a business owner can minimize taxes paid to Uncle Sam and put more cash in their pockets.
A Sole Proprietorship is a single owner tax entity. It is the simplest and easiest form of tax entity because it doesn’t require any legal organization or a separate tax return.
A Partnership is a multiple owner tax entity. A separate tax return is required; however, the owners pay federal income taxes on business income via their personal tax returns.
An S Corporation can be a single or multiple owner tax entity. A separate tax return is required however S corporations follow the pass-through taxation concept just like a partnership.
A C Corporation can be a single or multiple owner tax entity. A separate tax return is required. Owners of C corporations can experience double taxation, with profits taxed once at the entity level and again at the owner level when dividends are paid to owners
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David Wolf on February 9th, 2009 1:23 pm
Very important to understand this at the front end of organization. Thanks for your simple and easy to understand summaries here.
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cassy on February 9th, 2009 8:41 pm
thanks for posting this information,me i want my business taxed as a sole proprietorship,coz its the easiest way and it does not need a lots of rquirement!
Jaclyn on February 10th, 2009 11:09 am
That is so very true…the smallest incorrect tax choice could end up costing you hundreds and maybe even thousands in money that you probably can not afford to pay. It is so important to make sure everything is correct on your taxes, if doing them yourself…i suggest rechecking them two and maybe even 3 times to make sure you haven’t missed anything or filed something wrong, but more strongly…even for personal taxes, i highly suggest having a tax service do them for you…that way you will know without a doubt they are done properly.
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