Question

what are Tax compninsations for C Corp, S corp, partnerships and LLCS? Please explain each one for each enity

Answer 1

An LLC's tax is calculated and paid on the owner's individual tax return based on his percentage of ownership in the company. If you're a 50 percent owner with $60,000 in net profit, you'd pay tax on 50 percent of that profit or $30,000.

An S Corporation pays a salary to the working owner of the business, then any remaining profit or loss flows through to the owner's personal tax return after subtracting that salary as a deductible expense. An S corporation generally pays more tax than an LLC due to the additional payroll taxes and state corporate taxes that can be applicable. Any salary that the S Corporation pays to an owner is subject to state unemployment tax, disability tax, Social Security tax, and Medicare.

A C corporation is a legal entity owned by shareholders. The corporation itself is held legally liable for the actions and debts of the corporation, not the shareholders. Corporations are required to file federal, state, and maybe even local taxes. Most companies must register with the IRS, state, and local agencies. The corporation will receive a tax ID number or permit. A corporation is a single tax-paying entity. Corporations will pay income tax on their profits, unlike sole proprietors and partnerships. Corporations are taxed twice. The corporation is taxed first when it makes a profit, and the shareholders are taxed when they receive a dividend from the corporation. The C corporation tax return is the regular Form 1120.

A partnership is a single business where two or more people share ownership. Most partnerships will need to register with the IRS, state and local revenue agencies, and partnerships must obtain a tax ID number or permit. A partnership files an annual information return to report the income, deductions, gains and losses of the company’s operations, but the entity will not pay income tax itself. This return is the Form 1065. The profits and losses from the partnership get passed through to the partner’s K-1 and will be reported on the partner’s individual return. Partners will not receive a W-2 from the partnership.