comparative_forms_of_doing_business - Restrictions on type...

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Tax Attributes of Different Forms of Business (assume partners and shareholders are all individuals) Sole Proprietorship Partnership/Limited Liability Company S Corporation C Corporation Restrictions on type or number of owners One owner. The owner must be an individual. Must have at least 2 owners. Only individuals, estates, certain trusts, and certain tax-exempt entities can be owners. Maximum number of shareholders limited to 100. None, except some states require a minimum of 2 shareholders. Public offering Not applicable Yes, but some difficulty (LLCs – very difficult) No. Yes. Incidence of tax - double taxation No, sole proprietorship's income and deductions are reported on Schedule C of the individual's Form 1040. A separate Schedule C is prepared for each business. Entity not subject to tax. Owners in their separate capacity subject to tax on their distributive share of income. Entity files Form 1065. Except for certain built-in gains and passive investment income when earnings and profits are present from C corporation tax years, entity not subject to Federal income tax. S corporation files Form 1120S. Shareholders are subject to tax on income attributable to their stock ownership. Income subject to double taxation. Entity subject to tax and shareholder subject to tax on any corporate dividends received. Corporation files Form 1120. Tax rate Income taxed to owner at marginal rate. Income taxed to owners at marginal rate. Income taxed to owners at marginal rate. Income taxed at applicable corporate rates. Tax rates Progressive with six rates (10, 15, 25, 28, 33, and 35%) at individual level. Progressive with six rates (10, 15, 25, 28, 33, and 35%) at owner level. Progressive with six rates (10,15,25,28,33,and 35%) at shareholder level Progressive with four rates (15, 25, 34, and 35%) at corporate level. Two lowest brackets phase-out between $100,000 and $335,000 of taxable income. Plus 15/0% on any corporation dividends at shareholder level (If qualified dividends; otherwise marginal rate). Choice of tax year Same tax year as owner. Selection generally restricted to coincide with tax year of majority owners or principal owners, or to tax year determined under the least aggregate deferral method. Restricted to a calendar year unless IRS approves a different year for business purposes or other exceptions apply. Unrestricted selection year allowed at time of filing first tax return.
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Timing of taxation Based on owner's tax year. Owners report their share of income in their tax year with or within which the entity's tax year ends. Owners in their separate capacities are subject to payment of estimated taxes. Shareholders report their shares of income in their tax year with or within which the corporation's tax year ends. Generally, the corporation uses a calendar year, but see “Choice of tax year" above. Shareholders may be
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comparative_forms_of_doing_business - Restrictions on type...

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