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5 Things About Offshore Asset Protection Every Internet Marketer Should Know
Offshore instruments of asset protection no longer belong in the realm of the wealthiest individuals with high paid financial advisors. Thanks to the internet and globalization of financial markets, there are plenty of firms that can help just...
Basic Home Loan Terms Explained
The wonderful world of home buying can sometimes overwhelm the first time homebuyer. They are inundated with information riddled with terms of art. ARMS, points, interest rates, good faith estimates, pay-downs, lock-in dates, so on and so forth. ...
Five Ways to Improve Your Bottom Line
Copyright 2005 Log Cabin Rustics
“A penny saved is a penny earned”, the old adage attributed to Ben Franklin, only tells half of the story. A penny saved is really better than a penny earned, because you don’t have to pay taxes on it. Here,...
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Student Credit Cards 101
If you’re a college student, you probably already have a credit card. If not, you may have plans to get one or more soon. So why should you read on?
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The Benefits Of Incorporating Your Business
What do General Motors, Microsoft, AT&T and many other major businesses in America have in common? They’re corporations.
A corporation is a separate legal entity that functions separate and apart from its shareholders or owners. You can incorporate on your own without an attorney, although it wouldn’t hurt to seek legal advice. And you can incorporate in your home state or any other state of your choosing.
More than half a million business entities have their legal home in business-friendly Delaware, including more than 50 percent of all U.S. publicly-traded companies and 58 percent of the Fortune 500. Nevada, New York, California, Arizona and Florida are also magnets for businesses wanting to incorporate.
Protection Against Personal Liability
Incorporating offers a variety of legal and tax advantages. For one, it’s one of the best ways a business owner can protect his or her personal assets. As a separate legal entity, a corporation is responsible for its own debts. Shareholders of a corporation are generally not liable for the obligations of the corporation. Therefore, creditors of a corporation can seek payment from the assets of a corporation, but not the assets of its shareholders. This means that business owners can conduct business without risking their homes or other personal property.
Tax Advantages
Many businesses choose to incorporate for tax advantages. Corporate profits aren’t subject to Social Security, Medicare, workers compensation and other taxes, which adds up to 15.3 percent in taxes. An individual proprietor would need to pay all of these taxes, commonly referred to as “self-employment taxes” on all income earned by the business. But with a corporation, only salaries are subject to these taxes.
C-corporations provide even greater tax flexibility when it comes to profits. By simply dividing income between the corporation and the shareholders, businesses can save thousands of
dollars each year on taxes. With a C-corporation, the first $50,000 in profits is taxed at only 15 percent -- plus, there are no Social Security or Medicare taxes.
If you incorporate in a tax-free state like Nevada or Delaware, there are no state income taxes. Therefore, if you’re in the 28-percent tax bracket and shift $50,000 of your personal income into a corporation, you could save about $14,000 per year. (This figure includes the money saved by not paying social security and Medicare taxes).
Corporations also enjoy the ability to deduct business operating losses. In fact, they have very few restrictions on operating and capital losses. You can generally carry losses back three years forward for 15 years. But sole proprietorships have stricter rules. They’re also subject to a higher probability of a tax audit if there are losses.
Speaking of audits, that brings us to another benefit of incorporating. Corporate returns have fewer "red flags" than individual returns. Consequently, the IRS conducts fewer audits on corporations than individuals.
Fringe Benefits and Other Deductions
Corporations also enjoy a variety of fringe benefits and other deductions. A corporation can set up a 401(k), for example, that would allow you to exclude a higher amount of income than a regular IRA. And employee savings may also be doubled with a corporate matching program. Corporations also can deduct 100 percent of the health insurance premiums paid on behalf of an owner-employee.
Additionally, a corporation can deduct other expenses like automobile insurance, education benefits and life insurance. But for sole proprietors, these expenses are subject to strict limitations (if deductible at all) and can be "red flags" that trigger an audit.
About the Author
Kate Smalley
Connecticut Secretary
Specializing in Transcription Services
kms@connecticutsecretary.com
http://www.connecticutsecretary.com
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| The US government agency responsible for tax collection and tax law enforcement. Includes income tax forms, instructions, and agency publications. |
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| H&R Block | Taxes, Online Tax Preparation, Tax Software, Filing ... |
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| TaxCut Online | H&R Block | Online Taxes, File Taxes Online ... |
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| Income Taxes, Tax Returns, Refunds, Deductions and E-File Software ... |
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| Personal Finance - Get tax and estate planning advice and information from Forbes.com. |
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| The Tax Foundation - Educating Taxpayers Since 1937 |
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| Welcome to the Vermont Department of Taxes |
| Welcome to the Vermont Department of Taxes... ... Changes to Property Tax Adjustments in 2007 - updated 10/18. - Tax Expenditures Transition Report on ... |
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| Franchise Tax Board Homepage |
| The department that collects state personal income taxes and bank and corporation taxes for the State of California. Access to forms and tax information. |
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| HM Revenue & Customs: Home Page |
| News and information on tax and national insurance, including downloadable leaflets and forms and the latest news on filing tax returns on-line. |
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| State and Local Tax |
| Piper Resources; State Tax Rates and Structure ...Federation of Tax Administrators; State Payroll Taxes Information ...Symmetry Software ... |
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| Quicken.com |
| www.quicken.com/taxes/ - 3k - Cached - Similar pages |
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| Tax news and advice from Bankrate.com |
| Information on all phases of tax planning and preparation. |
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| Online Tax Advice - Tax Preparation Help - Income Tax Tips |
| Income Tax Tips - MarketWatch offers online tax advice and tips. ... IRS inflation adjustments mean tax break on next year's taxes. ... |
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