Incorporate your Business as C or S corporation:
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Before you start your business with Corporation, we would like to provide more information about Corporation to help you understand the structure and regulations by the government.
To incorporate your business will enjoy a number of advantages, including:
Limited Liability Incorporating your business limits personal liability for business debts — this means owners are not normally financially liable for business debts and court judgments.
Tax Advantages You can split business income between yourself and your corporation, thereby lowering income taxes.
Access to Capital Corporations have better access to private venture capital than any other type of business. They are also well positioned to raise capital by selling shares to the public.
Employee Perks The owners of a corporation who work for the business are treated as employees. They can take advantage of tax-deductible, corporate-paid benefits such as:
- pension plans
- stock-option and stock bonus plans
- medical expense reimbursement
- term life insurance coverage
After you incorporate your corporation, you may choose to be taxed as S Corporation or C Corporation from IRS. Below are the differences between S corporation and C Corporation:
- Taxation. Taxation is often considered the most significant difference for small business owners when evaluating S corporations vs. C corporations.
- C corporations. C corps are separately taxable entities. They file a corporate tax return (Form 1120) and pay taxes at the corporate level. They also face the possibility of double taxation if corporate income is distributed to business owners as dividends, which are considered personal income. Tax on corporate income is paid first at the corporate level and again at the individual level on dividends. Please consult with us how to avoid double taxation.
- S corporations. S corps are pass-through tax entities. They file an informational federal return (Form 1120S), but no income tax is paid at the corporate level. The profits/losses of the business are instead “passed-through” the business and reported on the owners’ personal tax returns. Any tax due is paid at the individual level by the owners.
- Personal Income Taxes. With both types of corporations, personal income tax is due both on any salary drawn from the corporation and from any dividends received from the corporation. Please consult with us for more detail how to save your tax for shareholder who work at Corporation.
- Corporate ownership. C corporations have no restrictions on ownership, but S corporations do. S corps are restricted to no more than 100 shareholders, and shareholders must be US citizens/residents. S corporations cannot be owned by C corporations, other S corporations, LLCs, partnerships or many trusts. Also, S corporations can have only one class of stock (disregarding voting rights), while C corporations can have multiple classes. C corporations therefore provide a little more flexibility when starting a business if you plan to grow, expand the ownership or sell your corporation.