3 REASONS TO BECOME A C CORPORATION

Almost all small businesses in the U.S. are pass-through entities—sole proprietorships, partnerships, limited liability companies, and S corporations. When it comes to small businesses, of those with no employees other than owners, 98.5% are pass-throughs and of those with employees, 77.5% are pass-throughs. These entities have been touted as a way to avoid ganda taxation.

Corporations are taxed, but dividends paid to shareholders are not deductible by the corporation although taxed again at the shareholder tingkat. But in today’s tax and economic environment are pass-throughs the best entities to use for conducting business.

1. Flat tax on keuntungans

Corporations pay a flat 21% tax on keuntungans. This tax rate applies whether the corporation is a microbusiness and multinational. The tax, which is paid by the corporation, is only on net pendapatan revenue minus deductions. Deductions include reasonable compensation paid to owner employees.

In contrast, owners of pass-through entities paid tax on their sharing of business keuntungans on their individu returns. This can be at rates up to 37%. The qualified business pendapatan deduction of up to 20% was created when the flat corporate rate went into efek to equal the tax imposed on businesses.

capcutstory.com owners with losses or only modest keuntungans may pay a low tax rate remember that pendapatan tax rates are graduated, so only kampiun dollars are taxed at the kampiun tax rate. But successful owners of pass-throughs may pay a high tax rate. They may not qualify deduction because their pendapatan is too high, so they’re paying as much as 37% on their sharing of keuntungans.

2. Modest tax on owners

The net investment pendapatan tax of 3.8% applies, as the termin implies, on investment pendapatan for owners with modified adjusted gross pendapatan over a threshold amount applicable to their filing status. Investment pendapatan includes dividends, as well as keuntungans derived from a pass-through in which the owner does not materially participate. So, an investor in a pass-through may pay tax up to 40.8% on his/her sharing of keuntungans.

Congress is now considering expansion tax to apply to owners of pass-through entities, regardless of whether they’re active or passive in their businesses. While the pendapatan threshold tax may be raised and headlines suggest it will only apply to high-income people, the expansion of the tax to the owners sharing of active business pendapatan means a tax rate on successful owners of pass-throughs that is ganda that of the rate corporations even multinationals.

3. Ease of crowdfunding

Raising capital obtaining loans can be challenging for small businesses. Today, online platforms facilitate finding needed money. If the business wants to seek equity financing—bringing in new investors through crowdfunding, being a corporation is the easiest way to do this.

Corporations, by definition, cannot have more than 100 shareholders, which greatly limits equity crowdfunding. And arranging ownership-sharing through partnerships can be complicated.