When starting a business, you have to make a decision about the type of business structure to set up. The taxes and filing requirements will depend on the type of business structure the business operates under. There are different types of business structures which includes: Sole Proprietor-Self Employed, Partnership, C Corporation, S Corporation, LLC- Single Member, LLC- Multi Member, LLC Corporation. The cost we charge to file the tax return for a business depends on the type of structure it i
C Corporation is a separate tax paying business entity. The Corporation pays Corporate Income Taxes on the profit, and then, the shareholders also pay taxes on any dividends received from the Corporation that the Corporation cannot deduct as a business expense (this is referred to as double-taxation).
Limited Liability Company- LLC a business that elects to be taxed as a Corporation also must file taxes on form 1120; (to elect to be taxed as a corporation, the LLC must file form 8832).
Partnerships file form 1065 to report the profit or loss from the Partnership. Partnerships do not pay taxes, instead, the income or loss flows through to each partner who will receive a Schedule K-1 to report their share of the income or loss on their personal tax return. The Income is reported on the 1040 and is taxed at the Partner's Ordinary Personal Tax Rate.
Multi-member LLCs are taxed the same as Partnerships unless elects to be treated as a C Corporation or S Corporation.
Non-Profit organizations such as 501(c)(3) can file form 990 to report the gross revenue and expenses from the Non-Profit activities. There are simplified versions of this form available for smaller organizations with gross receipts less than $200,000 and assets less than $500,000. If the organization's gross receipts are less than $50,000 then the Non-Profit may be able to use a check the box method of filing known as e-Postcard by filing form 990-N.
S Corporations bypass the corporate tax since the income or loss from the S Corporation return (1120 S) flows through to the shareholders personal tax return and Each shareholder will receive a Schedule K-1 from the 1120 S return, which will have their share of income or loss from the S Corporation. This income is taxed at the shareholder's ordinary tax rate from their personal tax return. Corporations who want to be treated as an S Corporation must make the election by filing form 2553.
Sole Proprietors and Single-member LLCs (who do not elect to be taxed as a corporation) file using form 1040 with a Schedule C attached. Self-Employment taxes are paid based on the amount of profit (up to 15.3% on 92.35% of the profit will be taxed SE-Tax). The profit amount is also added to any other income on the personal tax return, and taxed at the Personal Ordinary Tax Rate.
A husband and wife who own and operate a business (Qualified Joint Venture) may also choose to file with the Sch C.
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