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The filings of a company are a collection of papers that reveal its essential characteristics. Name, mailing address, company description, contact details for a company representative, and many more examples. Regardless of the jurisdiction in which a company is formed, an Articles of Incorporation filing must be submitted. By incorporating your firm, you may protect your personal assets from business debts and increase your chances of attracting investors. You can have an endless number of shareholders who all get a cut of the company's earnings and pay tax on those profits individually. There are positive tax implications for businesses that distribute dividends. Potential shareholders in a company create the corporation by exchanging cash, assets, or both for shares of capital stock. When calculating its taxable income, a corporation may often use the same methods as a sole proprietorship. Additionally, a company is eligible for certain deductions. A C company is treated as a distinct taxpayer under federal income tax law. A corporation's activities include making a profit or loss, paying taxes, and sharing that cash with its stockholders. Dividends received by shareholders from a company are subject to taxation at both the corporate and individual levels. The result is double taxation. Dividends paid to shareholders do not result in tax savings for the company. Any corporate loss is not deductible for stockholders.
For federal tax purposes, a S corporation is a corporation that has made the election to pass through to its shareholders any and all of the company's taxable income, losses, deductions, and credits. The revenues and losses of a S company are passed through to its shareholders, who must then file individual tax returns and pay taxes at their respective marginal rates. This means that S-corporations may avoid paying taxes twice on their business revenue. Certain passive income and built-in profits are taxable at the entity level for S companies.
The C corporation is a typical company, while the S corporation has asked the IRS to give it a unique tax standing. It gets its name from Subchapter S of the Internal Revenue Code, which says what it is. When starting a company, Form 2553 must be sent to the IRS and all S corporation rules must be met in order to choose to be a S corporation.
Taxation. Taxes are often seen as the most important difference between S corporations and C corporations by small business owners.
C corporations: C corporations are taxed as different companies. They fill out Form 1120 as a business and pay taxes at the business level. They could also be taxed twice if corporate income is given to business owners in the form of dividends, which are treated as personal income. When a company makes money, it pays tax on that income first at the company level and then again when it pays dividends.
S corporations: S corps are tax entities that pass through. They file a federal report for information (Form 1120S), but they don't pay income tax at the business level. Instead, the business's gains and losses are "passed through" and shown on the owners' personal tax records. The owners pay any taxes that are due on their own.
Corporate ownership: There are no rules about who can own a S company, but there are for a C corporation. S corps can only have up to 100 owners, and those shareholders must be US citizens or permanent residents. C corporations, other S corporations, LLCs, partnerships, and many trusts can't own S companies. Also, S companies can only have one class of stock, regardless of vote rights. C corporations, on the other hand, can have more than one class. C companies give you a little more freedom when starting a business, especially if you want to grow, add more owners, or sell the business.
A Limited Liability Company (LLC) is a type of business structure that is allowed by state law. Each state may have different rules, so if you want to start a Limited Liability Company, you should check with your state.
Members are the people who own an LLC. Most states don't have rules about who can own an LLC, so people, businesses, other LLCs, and even foreign organizations can all be members. There is no limit on how many people can join. Most states also allow LLCs with only one person, called "single-member" LLCs.
Some businesses, like banks and insurance companies, usually can't be LLCs. Check the tax rules of your state and the federal government for more information. Foreign LLCs have to follow different rules.
Depending on what the LLC chooses and how many members it has, the IRS will treat it as either a company, a partnership, or as a "disregarded entity" that is part of the tax return of the LLC's owner. For federal income tax reasons, a domestic LLC with at least two members is treated as a partnership unless it files Form 8832 and says it wants to be treated as a company. And an LLC with only one person is treated as a single company for income tax reasons (but as a different entity for employment tax and some excise taxes) unless it files Form 8832 and chooses to be treated as a corporation.
Form 8832, Entity Classification Election, is used by an LLC to choose how it will be taxed by the federal government if it doesn't want to use its usual classification or wants to change its classification. In general, a choice about how to classify an LLC can't go into action more than 75 days before the date the choice is filed or more than 12 months after the date the choice is filed. In some cases, an LLC may be able to get help with a late poll. For more information, look at the Form 8832 General Instructions.
There is only one person responsible for the company's actions under a sole proprietorship. To rephrase, a lone proprietor is the only owner of the company. Due to its low entry barrier, this business model is widely used by the transportation industry. However, all revenue and expenses incurred by the company must be reported as such. This means that come tax time, you'll need to report not just your earnings but also any losses you took on over the year. Furthermore, a liability is the primary worry of a sole proprietorship. When someone files a lawsuit against a sole proprietorship, they are really suing the company owner personally.
If you're thinking about starting a trucking firm as a sole proprietorship, here are some things to think about and keep in mind:
Naming your business is an important part of building your brand, but if you choose a name other than your own name, you'll have to register it with the right people. This is called registering your "Doing Business As" name (DBA).
A fictitious name, also called an assumed name, trade name, or DBA name, is a business name that is not the same as your real name, the names of your partners, or the name your LLC or company is officially listed under. It's important to know that when you start a business, the official name of the business is the name of the person or organization that owns the business, unless you change the name and register it as a DBA name. Take this situation as an example: John Smith starts a job painting. John doesn't want to run his business under his own name, so he calls it "John Smith Painting" instead. This is a fictitious name, and John will need to file it with the right local government office. On all government forms and applications, like those for workplace tax IDs, licenses, and permits, you need to put the formal name of your business.
When the following happen, you need a DBA:
Depending on where your business is based, you can register your DBA with your county clerk's office or with your state government. There are a few places where fake business names don't have to be registered.
