Attorneys at Law

Be Informed.

Be informed.

How Will Your Business Be Taxed on Profits?

A Philadelphia business law attorney provides assistance in determining how your company is taxed. Your business is taxed in different ways depending upon the structure of the organization. You need to make certain you understand the tax implications of different kinds of business entities, as this can make a major impact on your bottom line.  Tax considerations are one of many important factors that matter when assessing what your best options are for organizing your company. 

Curly & Rothman, LLC can provide you with invaluable assistance in understanding exactly what is involved in taxation issues for companies. We can provide you with advice on this matter and on other important legal issues that affect how your company is taxed. To find out more about the different ways in which business tax rules affect your company and personal income, give us a call today.

How is Your Business Taxed on Profits?

There are a few primary ways that a business could be taxed on profits. One possible option is that your company could have to pay taxes on its profits. This is the taxation method for C-corporations. The problem with this method of taxation is that it could end up with company profits being taxed twice. The company may have to pay taxes, and the owners of shares of the company could also be forced to pay taxes as well.  This can cost you a lot of money, especially if you have a closely held corporation.

Another possible way that a business could be taxed is the profits and losses of the company could end up being passed on to owners and could be declared on the owner's personal tax returns. Many different kinds of businesses are taxed in this manner. For example, partnerships, sole proprietorships, and S-corporations all pay taxes through various types of pass through taxation.   There are some benefits to this, in that the company does not have to pay taxes directly.  Instead, the profits and losses are simply taxed based on the income tax rate of the owners of the particular organization.

Although sole proprietorships, partnerships, LLCs, and S-corps all allow profits and losses to be declared on the personal tax returns of business owners, this does not mean that they are all treated the same way for tax purposes. In some cases, for example, the company has to file tax returns as well as the individual, even if the business does not have to pay taxes. This is the case for S-corps, for example. In other situations, like when you have a business operating as a sole proprietorship, only the individual has to file tax returns. The company does not have to do so. This can save you money on accounting expenses.

Some business structures also provide more tax flexibility than other business structures do. For example, you can benefit from being able to categorize some of your income as distributions if you organize your business as an S-corp, instead of having the income categorized as salary. This means that you will not have to pay certain types of taxes on the income that is categorized as a distribution. You will not have to pay Social Security or Medicare taxes on the income that has been categorized as distributions. You need to make sure that you comply with IRS rules and that you pay yourself a reasonable salary if you decide to take this approach, as you could find yourself facing substantial financial consequences if you have not paid yourself a reasonable salary and have categorized too much income as a distribution for purposes of trying to save on taxes.

How a Philadelphia Business Law Attorney Can Help You

A Philadelphia business law attorney can provide you with invaluable assistance in determining how to structure your organization for income tax purposes. We can help you to ensure that you make smart choices when it comes to taxation issues. You need to consider possible tax benefits associated with different business structures as well as thinking about the costs associated with forming various types of business entitles.

Curley & Rothman, LLC understands the ins-and-outs of business tax issues and we can make certain that you make smart choices and comply with your IRS tax obligations. To find out more about the ways in which we can let you to be smart about your business structure and for help organizing your company in the manner that is most advantageous to you, give us a call at 610-834-8819 or contact us online today.

Business LawScott Rothman