Category Archives: Business Structure

C Corporation Vs S Corporation – Paul Gaulkin CPA

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Many people wonder the differences between a C corporation and S corporation when they choose to incorporate their business. Below we will discuss these differences in detail in an easy to understand format. C Corporation A C corporation is generally considered the standard corporation; however, it is normally used by big businesses. By comparison, business entities like sole proprietors, S corporations, and limited liability companies are designed for freelancers and small businesses, as well as businesses not looking to raise … Read more →

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Employee Misclassification Can Become an IRS Penalty

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If you are an employer it is a good idea to know how to classify your workers. The IRS has estimated that millions of workers are not being classified correctly and therefore the IRS is losing large sums of revenue dollars that it could be bringing in. If an employer miss classifies an employee as an independent contractor, the employer will not withhold employment taxes and the income that was given to the misclassified employee may never be reported. Employee … Read more →

Business Structure

C Corporation Benefits

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When is it best to use a C Corporation? It depends on your needs. Most business structures are flow through which means that income or losses from the business with end up on your personal tax return. There is no federal income tax that is paid at the business level. C Corporation Benefits In terms of federal tax, all entities except the C Corporation are flow through structures. This can be beneficial in a few ways if you know what … Read more →

Business Structure

Double Taxation of Corporations

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Some people have a misunderstanding of how double taxation and a C corporation work. Most people think that you are required to be taxed twice if you have a C corporation but the fact is that is not completely correct. In fact there are three ways to be paid with a C corporation and only one of them results in double taxation. Double Taxation of Corporations When a C corporation issues a dividend to its shareholders it is issuing money … Read more →

Business Structure

How Being Unicorporated Could Get You Audited

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Unincorporated businesses, or sole proprietorships, are a popular business structure for entrepreneurs just starting out. However, the unincorporated business owner must be aware that the IRS will specifically mark their company for tax audits. This is because, typically, unincorporated businesses fail to accurately keep up their records, often failing to have a separate bank account, or even to retain a proper business license. They are sometimes not state registered, have no payroll, and oftentimes report earnings on a personal rather … Read more →

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Some Drawback To Having A C Corporation

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C Corporations have the drawback of having different filing deadlines from other returns—even other corporate returns. Therefore, they run the risk of being filed late. Form 1120 & C Corporations C Corporation tax returns are filed using Federal Form 1120, in addition to any state tax forms which certain states require. Be aware that, in such cases, a state return must be filed with income apportioned for nexus, attached to the income tax. All this must be considered in time … Read more →

Business Structure