Various Forms of Advantages of incorporating in Taxes
By: Arun | Posted: 23rd March 2010
Operating a corporation form of business is much more advantageous than to the other forms like sole proprietorship. The tax and legal system provides several benefits and relative immunity specifically to the corporations and their owners.
Among many of the major and minor tax advantages, you will find the following as most relevant and useful for your own business corporation.
Owners at Ease with Business Liabilities: A Legal Protection
The biggest advantage of operating a corporation is a legal shield provided to its owners from their business related liabilities. Majority of the corporation owners prefer this legal protection. A corporation has its own locus standee in terms of both legal as well as the taxation. Separation of legal and tax entities enables a corporation for incurring debt and liabilities related transactions as an independent business entity. As a result, the owner remains free from the liabilities and enjoys relative immunity from the business debt.
Tax Deductions with Fringe Benefits
Tax advantages related to the fringe benefits are a plenty for a corporation. Various types of tax deductions can be availed favoring the business, employees, and family members of the owner. The benefits are equal even if you are the sole stakeholder in the business.
Another intelligent move would be to remove the self-employment tax cap and by reducing the investment in "Social Security Tax" along with the "Medicare Tax." Individual's tax liability thus also is reduced this way and you become an employee of your own corporation.
Deriving Tax Deduction Benefits with Business Losses
Business losses incurred, if any, also come under the purview of tax deduction benefits and give you a safe hand. There are no upper ceiling limits for incurring business, capital, and operating losses. Meaning thereby, you can freely carry forward or carry back your losses to the previous as well as the subsequent tax-years.
Sharing and Shifting Income for Tax Forms Benefits
Among other benefits of incorporating, the 'Income Sharing' is an important factor. In simplest terms, it is an act of dividing the income among the business, the corporation, and its shareholders. An intelligent tax consultant would design this division in such a way that the overall tax liability automatically comes down substantially.
For an individual who is running a small-scale business but its stakeholders are falling into the higher tax brackets this type of income classification is extremely helpful.
In case of the corporations having less than 100 employees on their payrolls would not attract the corporate tax rates implications. Here the business profits are generally paid out already in forms of tax-deductible salaries and other fringe benefits to the employees.
Taking Benefits of Dividends Received Exclusion
If you are lucky, enough to run a cash-rich corporation and your shareholders are not inclined to withdraw any cash assets you can surely take an advantage of "dividends received "exclusion. It is extremely beneficial for your business.
Tax Forms Saving Strategy with Assets
This tax saving strategy is almost similar in nature with the income shifting. However, it is not free from in-depth scanning and scrutiny by the tax authorities. You must be very careful while adapting to this measure and any action taken therein must be in consultation with an experienced tax consultant or attorney.
About the Author
{if $articleAuthor->occupation}Occupation: {$articleAuthor->occupation}
{/if}
{$articleAuthor->biography}
{if $articleAuthor->website}{/if}
This article is copyright
Printed From: http://www.goinglegal.com/various-forms-of-advantages-of-incorporating-in-taxes-1463262.html
Back to the original article
Tags: business entity, tax deductions, sole proprietorship, business capital, purview, business debt, independent business, tax deduction, self employment tax, business employees