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
Continue Reading: “Decide How Your Small Biz Will Be Taxed”
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