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Double Taxation Problems
What is double taxation?
is where two separate jurisdictions levy
on the same declared income, assets or financial
. In other words, it could occur with
, capital tax or
. Certain countries have tax
to mitigate the effects of double taxation. In the U.S., the term double taxation usually refers to a situation where tax is levied on a corporation’s profits as well as on the shareholders’ income when they receive a part of this profit. Listed below are a few questions answered by the Experts on double taxation problems.
If a person was to start their own business and wanted to avoid double taxation and protect their assets, would an S-Corporation or a Limited Liability Company (LLC) be better for the person?
In most cases, both an S-Corporation and an LLC would provide asset protection to the owner as long as they followed the proper procedures and adhered to the guidelines. Double taxation generally happens when the corporation is taxed and then the employees of the corporation are taxed as well through their paychecks. To choose what is best for the business, it would be better to speak with an attorney and a CPA in the state where the business is going to be registered to ensure that all guidelines are met to avoid double taxation.
If a person wanted to start a company, would they want to start it in the State of Massachusetts so that it would be cheaper to avoid double taxation? And how would filing for an LLC versus a corporation affect this?
In most cases, filing for an LLC in the State of Massachusetts would cost around $500 and filing for a corporation would cost around $275. If you are
to file for a corporation, it may be better to file as an S-Corp so that the business may get pass-through taxation and avoid double taxation. However, filing for an LLC is a less complicated process due to the absence of shareholders. If you have many shareholders, you may need the assistance of an attorney. For more information on this, visit
What is the difference between an S-Corp and a C-Corp?
An S-Corp is generally considered a pass-through entity where all the income passes through the shareholders so the company doesn’t pay taxes. Double taxation does not usually occur here because the only taxes that are paid are the
of the shareholders. A C-Corp, on the other hand, is generally taxed as a separate entity and files a
return. Here, the shareholders have to pay taxes on their personal income as well as on after-tax profits given to them by the corporation in the form of
—leading to double taxation.
What is the difference between an LLC and a corporation?
A corporation and an LLC are both considered limited liability entities as well as flow-through entities. In the case of a corporation, you could choose to be treated as an S-Corp to avoid double taxation. However, an S-Corp is more limited in terms of the kinds of shareholders that they have, so you may consider an LLC because they have more flexibility if you need to add shareholders later on.
In business, there are several
and regulations that govern double taxation. While you may have come across some of the problems related to double taxation above, there could be others that pertain to your own unique situation. If you need more clarity on this topic, put your questions to an Expert for quick insights and information to deal with your own case.
Recent Double Taxation Questions
Hi I didn't file a form 2553 for S-Corp. I am now about to
Hi I didn't file a form 2553 for S-Corp. I am now about to do my taxes what status would I file under. I don't meet the criteria to file a late election. Would I now be a CORP? as opposed to S-Corp? Do I need to file both Corp taxes & amend my personal taxes as well? Sincerely confused & thanks for your help
Hello, If i have a liquidating distribution for 30k does the whole amount get reported
If i have a liquidating distribution for 30k does the whole amount get reported on box 8, 1099 DIV issued by the Corporation? Assume the stock basis in the hands of the Shareholder, 2k is recovery of basis, 28k is Long Term Cap Gain (because held more than one year). Is this reported on Schedule D? is it reported as of 28k proceeds and no basis, or 30k proceeds and 2 basis for a net of 28k?
My US employer based in California is offering me a position
My US employer based in California is offering me a position to start up an operation in Ireland. Prior to moving to Ireland I will be selling my house in California. My question is about the tax requirements. While in Ireland I will be paid by my California based US employer. 1) Since I'm selling my house in California and will be gone for 12-18 month my employer should not withhold state tax correct? 2) Would I need to file a California state return if I'm not living in the state? 3) Would I file and exemption with the IRS so federal taxes are not withheld while I'm overseas? 4) I would have taxes withheld by the PAYE system in Ireland correct? 5) At the end of the year I would file federal taxes since i"m a US citizen but would have the double taxation treaty to minimize any federal taxes at the end of the year? If the above is correct please advise and what forms would I need to fill out for exemptions in the US?
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